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If the ocean freight industry didn’t already have enough fees and fines, here’s another. Shipping lines Maersk, CMA CGM, and Hapag-Lloyd have began implementing no-shows fines on shipments that fail to show up on the vessel.
Maersk started the ball rolling in April when it began levying a no-shows fine on eastbound shipments out of Europe. French liner CMA CGM followed suit in May, on shippers who do not deliver containers on booked routes. According to the company, it has been experiencing problems with space on the eastbound trades from Europe. Such “no-shows”, it says, prohibits from loading shipments from other suppliers.
“CMA CGM has been facing a large number of shortfalls due to late cancellations preventing us from accepting bookings on behalf of other valued customers. Booking reliability will assist CMA CGM to efficiently allocate space and equipment in order to guarantee our customers’ needs and requirements.” – CMA CGM
German liner Hapag-Lloyd followed with its own such announcement a couple of weeks later.
Implemented on April 10th, Maersk’s €125 fine applies to North European exports to the Middle East, Red Sea, and the India, Pakistan, Bangladesh, and Sri Lanka region. The liner will impose this fee on bookings cancelled within 7 calendar days before the estimated time of departure. According to the company statement, Maersk will treat “reducing number of containers in a booking” as a booking cancellation and the same fee will apply.
“In Asia, 20 percent to 30 percent of cancellations are the norm and is one of the key issues impacting our ability to deliver a reliable product to our customers.”
– Robbert Van Trooijen, Asia Pacific CEO of Maersk Line
As of June 1st, CMA CGM began imposing a $150/TEU cancellation fee on all equipment types (except reefer containers). It applies to European shippers and freight forwarders who make new bookings or transfer requests seven days before the sailing date. Particularly, on shipments heading to the Indian subcontinent, Middle East Gulf and the Red Sea.
In the event of no-shows, this fee will also be implemented. In this case, the booking party – in most cases the freight forwarders – will have to foot this fee.
From June 9th, German liner Hapag-Lloyd started to impose a $60 fine on all export shipments from Singapore to India. These are implemented on cancelled bookings made within three calendar days prior to vessel arrival.
While this appears to be the right move by shipping lines, it could cause problems for freight forwarders. OTIs and NVOCCs may find themselves facing an increasing loss of control over a customer’s shipment.
“For freight forwarders and NVOCCs, these fees could become a much bigger challenge. We do not necessarily control the cargo we are booking and often have no control over a client canceling at the last minute. The OTI community will have to prepare themselves. They should consider implementing policies to prevent potential accounting nightmares that could leave the OTIs stuck with cancellation charges.” – Klaus Lysdal, VP Sales & Operations, iContainers
Even if it seems that carriers are simply “testing” the effects of the no-shows fine by implementing it on smaller-volume routes, this fee appears to be a long-time coming. According to Hapag-Lloyd, around a quarter of its bookings fail to load because of no-shows.
Such no-shows cause huge costs for the carriers. To fill empty space, carrier’s lower rates as a last-ditch effort which can cause them to lose money. When flying on an airplane, prices tend to go up at the last minute. But container shipping has yet to begin such a transition.
“The no-shows fine are a step in the right direction from the carriers. Certainly from their perspective, it’s strange that they have never been able to implement charges like these in the past. Now that there are fewer carriers to choose from, the chances of these fees sticking around have greatly increased.” – Klaus Lysdal
The New York Shipping Exchange estimates that no-shows cost the shipping industry a whopping $23 billion in additional costs annually. Taking this into consideration, it has drawn up a new contract for carriers and shippers to deal with ocean freight reservations.
Interesting as it is, this is not the first time that shipping carriers have tried to implement such a fee. For years now, liners have implemented variations of the no-shows fine. Should the carriers stick with these new implementations, the no-shows issues can be expected to decline significantly. Otherwise, other more unconventional options may have to be considered.
“If this fails to work again, the next step in the process may be to follow what airlines do and demand payment at the time of booking. This would certainly ease the burden on the carriers’ planning. But it would also increase demands for them to deliver in terms of space and equipment. Plus, quite possibly increase sailing schedule integrity and dependability too.” – Klaus Lysdal