Sunday, April 17, 2016

Freight Forwarding Agents and Shippers Make SOLAS Case to US as First VGM Charges by Ports Announced

House of Representatives Hearing on American Coast Guard U Turn Whilst Container Weighing Tariff Released
Shipping News Feature
US – CANADA – WORLDWIDE – As July1, the deadline for the mandatory weighing of loaded export containers under revised Safety of Life at Sea (SOLAS) regulations gets ever closer, so decisions on pricing for the service by the main box ports have finally begun, at a rate that will shock many and only stoke the fires in the US where members at Friday’s hearing at the US House of Representatives Committee on Transportation and Infrastructure now cogitate on the arguments some American shippers and freight forwarding representatives have put forward for the US either for doing nothing or, as elsewhere round the globe, acting under the international law it had previously appeared to wholeheartedly accept.

Firstly those rates as it is fair to say nobody really knew the level at which the ports would levy their charges. Remember, exporters can choose to produce their own Verified Gross Mass (VGM) by weighing the overall weight of export cargo in each box and adding the tare weight. Tare weights routinely appear on each container and shippers have been assured that they will not be held responsible for any variation in that particular element.

Now DP World, which of course operates terminals all over the world, has declared what it will charge to weigh export containers and issue a VGM certificate for cargo emanating from Canada, the rate being tucked away on page 15 Section 4.29 of its DP World Vancouver Terminal Tariff issued this month. And the figure is ….. CAN$245 (that’s US $191 or £135) safe to say higher than most onlookers we spoke to had expected. This of course is only one market and Canadian wharfage and associated charges can be notoriously expensive.

The Vancouver terminal is apparently using a scale calibrated and serviced by technicians approved by Measurement Canada and only intends to weigh the boxes for which no VGM has been supplied by the shipper. If a container arrives without the VGM the driver will be required to pay at the gate in advance for the service or the agent give a guarantee of payment. The weight will be recorded on the port record and a VGM certificate subsequently issued to the shipper. The service will commence on 23 June and the official rate quoted differs wildly from an unofficial declaration that customers based in another DP World facility, Caucedo Logistics Park, a free trade zone which adjoins the Dominican Republic port, will have only a US $50 bill for the process there.

The figure quoted however will be grist to the mill of the Agriculture Transportation Coalition, whose representative Donna Lemm gave evidence before the House Committee on Friday. Ms Lemm quoted figures citing estimates of a 20% to 40% increase for the grain producers should they adopt what after all is now international law, decided and voted for by the same US representatives, i.e. the Coast Guard Service, which now has told exporters this is not their responsibility.

No evidence was provided as to how this percentage increase was arrived at however and Ms Lemm continued that current US ‘rational’ methods i.e. the weight of the goods be declared by the shipper and the weight of the container by the ocean carrier, were not only perfectly adequate but she expected that the Coast Guard would doubtless confirm what it had already declared, as detailed in a previous article, namely there was no need for US exporters to follow the new regulations as everything was simply hunky dory.

Ms Lemm is presumably unaware then of the deaths caused directly by shippers failing to give accurate weights in the past, something far more likely when bulk goods, such as grain, are loaded into a container, yet simplicity itself to ratify under the new system provided facilities are in place, which they surely will be. Ms Lemm’s testimony can be read in full here.

As to the cost, it is hard to see how the agricultural lobby has arrived at its conclusion of a possible 40% increase when nobody at this stage knows what the actual cost will be should the weighing take place at the port of export. We decided to investigate the cost of retrofitting the necessary gear to a straddle carrier for example and in a brief survey were quoted £3 – 5,000. If one assumes logically that the ports will need to equip a large proportion of their equipment, and that therefore every container can potentially be weighed simply as it is transferred within the dock, the only question is whether the mass displayed on the drivers screen is recorded into the port management system (PMS).

Once again there will be a one off cost to synchronise the two, the weighing unit and the PMS, but when one considers the thousands of containers involved every week passing through a busy port the costs would seem to be comparatively negligible, certainly the DP World Vancouver rate looks severe.

If it was deemed detrimental to shippers it is fair to assume that the World Shipping Council (WSC) would be in the van when it comes to criticising the legislation. However the testimony given following that of Ms Lemm came from that organisation’s President and CEO, John Butler who reiterated many of the points made in the article mentioned earlier, namely that the Coast Guard, in the form of Rear Admiral Paul Thomas, had emphatically backed the SOLAS amendments without any query that the rules placed the responsibility for accurate VGMs upon the shipper, saying:

”The Coast Guard fully supports the SOLAS amendment and we did so throughout its development at the International Maritime Organization. We are currently considering how to implement this requirement and are actively discussing a wide range of enforcement options.”

Compare this to the short statement Admiral Thomas gave to the House Committee on Friday after he had then had assured the agricultural lobby last month that the new regulations ‘place no obligation upon the shipper, only on the vessel’, an astounding statement given the wording of the regulation. He told the Committee:

“The existing regulatory structure will continue to ensure compliance with SOLAS, including these new requirements, without the need for new Coast Guard regulations. The amendments should not appreciably impact shippers or ship operators or cause any delays in the supply chain in the United States.”

Mr Butler gave a clear picture of why the SOLAS regulations had needed changing. This was simply that the existing rules were constantly being broken and that people were dying and ships sinking as a direct result. Mr Butler’s testimony to the Committee can be read in full here and a video of the full hearing can be seen here.

Now it remains to see if the US is going to demonstrate whether it actually does value the safety of those involved in the container trade or simply chooses to ignore the will of every authority elsewhere. If a shipper is reluctant to give a verified weight one must ask why? If it is because they do not want a legal liability then they are surely hiding something, either their own or their staff’s inefficiencies, or indeed they are simply shying away from the monetary cost. If the US decides that they choose not to adopt the international law they had seemingly signed up to, what are the penalties for companies and their directors which transgress and misdeclare container weights under their current system.

These may of course all be moot points, if, as we suspect, weighing containers at the point of export becomes the norm for all boxes. Those who misdeclare mass will doubtless find their cargo short shipped and a port manager rubbing his or her hands with glee at the excess charges perhaps then to be imposed on the shipper. If on the other hand ports set the rates to weigh too high, shippers will find alternative, more economic measures and certain trades, one thinks of short sea feeder routes, will suffer as the charges make the transfer simply uneconomic.

Photo: The chemical contents spill out from a container crushed by overloaded units stacked above whilst at sea.