Executive tips on SOLAS compliance from INTTRA marketplace

Already facing issues ranging from overcapacity, downward pricing pressure, and more brand consolidation, carriers must now confront shipper’s concerns about regulatory mandates that will likely result in more seaport congestion.

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Editor’s Note: Ocean shipping experts agree that the implementation of Safety of Life at Sea (SOLAS) verified gross mass (VGM) regulations will add yet more complexity to the troubled global ocean container industry.

Already facing issues ranging from overcapacity, downward pricing pressure, and more brand consolidation, carriers must now confront shipper’s concerns about regulatory mandates that will likely result in more seaport congestion.

In this exclusive interview with Inna Kuznetsova, President of INTTRA Marketplace, we learn a bit more about what to expect.

Logistics Management (LM): VGM compliance comes into play as peak season planning begins. How long should shippers give themselves to be properly prepared? -
Inna Kuznetsova: There is no such a thing as being too well prepared…the alternative has a price tag on it. A shipper’s time to prepare depends on a few factors, such as the number of carriers used, the state of their IT systems, the use of third parties and even the goods shipped.  Each case requires a set of arrangements from contracts with the third parties to additional labor hours built into costs to amending the processes to training the staff.

LM: How can that process be expedited?
Kuznetsova: The process certainly will go faster and more smoothly if the carrier has stated its readiness to accept VGM digitally, and if it is possible to send it through one EDI to multiple carriers. It may take longer if there is a need for an individual connection to each carrier, or if there is a need to hire additional staff to send faxes. If a freight forwarder chooses to subscribe to a service for submitting VGM digitally, and the carriers accept it, there is still work to be done to update internal processes and train the staff.

Also, we get mixed messages on the need to provide eVGM for containers that are subject to transshipment after they start their journeys but before the regulation goes into effect on July 1. Some of these containers will be first loaded as early as May, so preparing for full readiness by that time may reduce the risks of delays and penalties.

LM: How many third parties will be vying for this piece of the business?
Kuznetsova: There are different ways to address compliance. Various businesses providing weighting services will clearly benefit. As for IT companies working with logistics, we have already heard from some about their preference to license our software in the future to ensure full standards compliance and cut down on development time and costs.

LM: Not all ports have the infrastructure to expedite inspections. Will we see vessel redeployment as a consequence?
Kuznetsova: After the West Coast ports congestion in 2015 we saw a shift of volume towards Gulf and Eastern ports. It is natural to assume that shippers and especially freight forwarders will re-balance their networks if certain ports become prone to delays and other options become more attractive.

As a UN agency, the IMO looks at the countries that have ratified the agreement to implement their own measures. So there may be different documentation requirements for different ports, and penalties may vary country by country. In addition, each terminal sets its own business rules even within the same country and area. We already heard from one terminal about plans to reject containers if the VGM is not received through the carrier 3 days before the arrival of the ship.  However, the other terminals in the same area have not made the decision yet.

In addition, the differences in equipment and infrastructure availability - e.g., access to weighing bridges - may account for differences and cause higher delays in some areas.

LM: If legislation is passed for 100 percent container screening, may we expect even more complexity?
Kuznetsova: Any time a complex process of shipment is amended with more steps, it adds time and costs for the work being done and the required equipment, as well as a longer waiting time. Yet, as with any safety measures, there are people’s lives on the other side of the scale. Leveraging technology to minimize the disruption, but still improve safety, is a good route to choose.

LM: Should shippers prepare for rate and/or surcharge hikes this year due to VGM issues?
Kuznetsova: This will be discussed and decided as a part of commercial negotiations between shippers and carriers.

LM: Will shippers be encouraged to purchase more insurance policies?
Kuznetsova: We have seen calls for additional insurance to account for the non-compliance risks as well as possible delays adding to transportation time. However, given that many shippers are self-insured, and policies vary, it is the subject of individual consideration for each shipper.

LM: Will we see more intermodal growth, hemispheric trade, and near-shoring as ways of mitigating the risk related to ocean carriage?
Kuznetsova: I think we will see more intermodal growth and near-shoring due to the growing number of mega-ships.  Not every port is equipped to receive them, so the use of transshipments will grow. This process is already going on since a lot of 19,000+TEU ships have been added lately and more are still on order. Even if the regulation leads to less use of ocean shipping, it will be difficult to separate these two processes.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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