How the Panama Canal Expansion Is Redrawing the Logistics Map
SupplyChain24/7 - June 26, 2016
The expansion of the Panama Canal will be the headline event in shipping in 2016. The $5 billion project promises to reorient the landscape of the logistics industry and alter the decision-making calculus of the shippers that the canal serves. Small percentages translate into big numbers in container traffic on high volume lanes between East Asia and the US. This trade represents more than 40 percent of containers flowing into the US. Rerouting 10 percent of that volume, therefore, is equivalent to building a new port roughly double the size of the ports in Savannah and Charleston.
This shift will have profound effects. The larger ports on the West Coast will experience lower growth rates, altering the competitive balance between West Coast ports and East Coast ports. (With global container flows rising, West Coast ports will still handle more containers than they do today.) It will also shape the investment and routing decisions of rail and truck carriers, magnify the trade-offs that shippers make between the cost and the speed of transportation, and potentially alter the location of distribution centers.
West Coast ports currently receive two-thirds of container flows from East Asia, with much of that cargo moving by rail and truck as far east as the Ohio River Valley, about three-quarters of the way across the US. But once the big, efficient "post-Panamax" container ships begin passing through the wider, deeper canal, the shipping dynamics will change.
For shipping to many destinations, using West Coast ports will still be the fastest option - but it won't necessarily be the cheapest. For price-sensitive cargo that is relatively expensive to move, routing shipments through East Coast ports to inland destinations will become more cost competitive and increasingly attractive.
Growth rates for the larger ports on the West Coast will decrease, competition among East Coast ports will intensify, and rail and truck traffic patterns will shift. The West Coast will always be the fastest option for reaching much of the US, but the East Coast will become the least costly option for many shippers. The battleground on which US ports compete for customers will move several hundred miles west, to a region that accounts for more than 15 percent of GDP.
The expansion underscores the need for shippers and carriers to adapt their strategies and operations in light of the growing complexity of the logistics field. Our review, we believe, is the most analytical public study of how the expansion of the Panama Canal will alter the logistics landscape of the US.
What is SOLAS?
ShipmentXchnage.com - June 26, 2016
SOLAS stands for the Safety of Life at Sea Convention (SOLAS). This convention was amended by the United Nation's International Maritime Organization (IMO) in November of 2014, requiring shippers to provide a container's Verified Gross Mass (VGM) to the carrier and terminal operator before a container may be loaded on board a vessel, with enough time in advance of loading for the carrier to complete the vessel stow plan.
Much of the confusion around SOLAS can be cleared up by understanding the International, National, and Commercial issues. At the time of this article, while the IMO has made the international framework of SOLAS's VGM requirements clear, many of the National (such as penalties and weight tolerances) and Commercial issues (such as the timing and method of submitting VGM data) remain unclear.
Containers cannot be loaded onto vessels without the container's VGM as of July 1, 2016. However, as enforcement and accuracy tolerances are national issues, individual countries may have separate schedules surrounding their areas of authority. It should also be noted that the implication of a July 1st start date is that VGM data will need to start being sent to carriers in advance of the July 1st date for containers being loaded on or after July 1st.
This is an International issue. The IMO defines a shipper as "a legal entity or person named on the bill of lading or sea waybill or equivalent multimodal transport document as shipper, and/or who (or in whose name or on whose behalf) a contract of carriage has been concluded with a shipping company."
As mentioned above, this is a National issue and the source of much of the confusion surrounding SOLAS, since many national governments have not made their positions clear as of the writing of this article. Some governments, like that of the United States, seem to largely be treating SOLAS as a commercial issue and are not issuing any new guidance or penalties related to SOLAS compliance. Additional fees for holding back containers at the terminal are a Commercial issue, and up to the terminal and carrier.
There are two methods for verifying container weight:
Method 1: When a container is packed and sealed, the shipper may weigh - or arrange for a third party to weigh - the packed container. If a third party weighs the container, the shipper will remain responsible for the accuracy of the weight.
Method 2: The shipper may weigh all materials to be packed into the container (including packages, cargo items, pallets, and any other packing or securing material), and add the tare mass of the container to the sum of all single weights of materials packed into the container. Again, if the shipper arranges for a third party to weigh the individual contents of the container under this method, the shipper remains responsible for the accuracy of the weight.
The tolerances and acceptable standards and requirements of weighing equipment are a domestic issue and as such are governed by the State in which the equipment was used. Also note that in some countries, like the UK, certification is necessary to be allowed to use Method 2 to compute the VGM. Can a Freight Forwarder submit SOLAS information on behalf of the shipper" Yes, but the shipper remains responsible for the accuracy of the weight.
As for how to submit VGM data to the carriers and terminals, this is a commercial issue and as such up to the carriers and terminals. There are presently three main ways being put forth:
1) A net new electronic message could be used
2) Shipping Instructions could be amended to include VGM data
3) A Verified Gross Weight document complete with signature could be emailed or faxed to the carrier
Again, it is up to the carriers and terminals as to which methods they will accept and under what timing. Formats and commercial terms on non-compliance could potentially vary from one Carrier to another. At the time of this writing, the specifics of the timing and formats of the VGM advice are still somewhat undefined.
Regardless of the method of submission the three main data elements of the VGM data are:
1) The verified gross mass itself
2) The method by which the VGM was computed (Method 1 or 2)
3) The signature of the responsible party
Obama Tries To Calm BREXIT Fears
The Hill - June 28, 2016
President Obama is warning against worldwide "hysteria" in response to Britain's vote to leave the European Union. Obama told NPR in an interview published Tuesday that the vote will "pause" European integration efforts but said the basic security and economic relationship between the US and Europe won't be disrupted.
"There's been a little bit of hysteria post-Brexit vote, as if somehow NATO's gone, the transatlantic alliance is dissolving, and every country is rushing off to its own corner," he said. "That's not what's happening." The Hill's Jordan Fabian with more on Obama's reaction to Brexit.
After the vote last week by one of the US's most important allies, Obama said he respected the country's decision, which he said "speaks to the ongoing changes and challenges that are raised by globalization." Obama, like many world leaders, had opposed such a move. Following the surprising decision by Britain, stocks fell domestically and internationally.
While the president had remained restrained in his immediate response to the vote, Vice President Joe Biden was more blunt. Speaking in Ireland on Friday, Biden warned against the "reactionary politicians and demagogues peddling xenophobia, nationalism and isolationism." Many have drawn comparisons to the UK's decision in the wake of concerns about terrorism and immigration to the same sentiment fueling the rise of presumptive GOP presidential nominee Donald Trump in the United States.
"I think this will be a moment when all of Europe says, 'Let's take a breath and let's figure out how do we maintain some of our national identities, how do we preserve the benefits of integration, and how do we deal with some of the frustrations that our own voters are feeling,' " the president predicted.
Ultimately, Obama said, he doesn't "anticipate that there is going to be major cataclysmic changes as a consequence of this. Keep in mind that Norway is not a member of the European Union, but Norway is one of our closest allies," Obama added. "They align themselves on almost every issue with Europe and us. They are a place that is continually supporting the kinds of initiatives internationally that we support, and, if over the course of what is going to be at least a two-year negotiation between England and Europe, Great Britain ends up being affiliated to Europe like Norway is, the average person is not going to notice a big change."
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Exim Small Business Group - June 29, 2016
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OCEMA Fully Supports Terminal Weighing Approach
Ocean Carrier Equipment Management Association - June 29, 2016
OCEMA said that a key benefit of the terminal weighing approach is that shippers will not be required to perform any additional actions in order to provide the verified gross mass of containers. A group of leading ocean carriers said Tuesday they will consider weighing containers as they enter marine terminals in the United States a "best practice" for meeting the International Maritime Organization's (IMO) new verified gross mass (VGM) requirement, scheduled to take effect Friday, July 1st.
"We are one day from the VGM implementation date. We have come a long way in a very short time frame," said Frank Grossi, chairman of the Ocean Carrier Equipment Management Association (OCEMA) and executive vice president of COSCO Container Lines America, Inc. "In order to ensure a soft landing, all stakeholders must work together to implement the flexible solutions to VGM outlined in OCEMA's Best Practice. Cooperation by all will prevent service interruptions and promote supply chain efficiencies."
OCEMA, which has 19 ocean carrier members, amended its recommended best practice for the acceptance and transmission of the VGM of containers to include a terminal weighing approach (TWA) in the United States. It said it had joined with six major East Coast and Gulf Coast port agencies--South Carolina Ports Authority, Georgia Ports Authority, North Carolina State Ports Authority, the Port of Houston Authority, The Port of Virginia and Virginia International Terminals, and the Massachusetts Port Authority, to agree on use of a common streamlined TWA to provide the VGM at port locations. That was made possible when OCEMA and the ports filed an agreement with the Federal Maritime Commission with regard to the cooperative effort. The agreement became effective on Friday, June 24.
OCEMA and the ports issued a joint policy statement on steps to be taken for VGM compliance at the facilities. In New York, members of the New York Terminal Conference have announced their approach to VGM in a "Pending Schedule of Rates" updated on June 24 and posted on their website that goes into effect on July 1. The members of the terminal conference are GCT Bayonne, CGT New York, Port Newark Container Terminal, APM Terminal, and Red Hook Container Terminal.
"If the terminal operator has not received a VGM EDI message from the bill of lading carrier prior to an export cargo laden container's arrival at terminal operator's over the road gate, then terminal operator will provide a certified VGM weight to the ocean carrier for such container. A fee of $10.00 per transition caused by no VGM at time of arrival at the gate will be charged to the bill of lading carrier. They also say Requests for containers to be drop-weighed, post-gate receiving, may be performed by the NYTC, in its sole discretion, at a cost of $125.00, plus applicable mounting and grounding fees. The conference says "Containers arriving at the terminal operator's rail ramp with no prior VGM update in the terminal operator?s system may be received into the terminal and charged a $75 per container fee."
The Agriculture Transportation Coalition, which has pressed the shipping industry for months to allow terminal scale weight to be used to meet the VGM requirement, said "dramatic progress is being made during this final week before the IMO's July 1 target implementation. Peter Friedmann, the executive director of AgTC, praised the Port of Charleston for "breaking the ice" and Hyundai Merchant Marine for issuing "the first formal announcement of a workable terminal weighing process" and said "Most individual carriers have now followed suit, and it appears that all major carriers to have published an 'in-gate terminal VGM calculation and conveyance to carrier' process by July 30. The AgTC's long-sought, intensely pursued bottom line: exporters will not be required to provide VGM - rather, the terminals will provide it to the carriers."
He asked "each line to identify the terminals which have agreed to this process, and to provide the VGM. Maersk has done this already, we are asking all other lines to also identify the specific terminals that have agreed to convey VGM to them. A critical remaining objective, of particular importance to many AgTC members who collectively ship hundreds of thousands of containers by rail to on-dock facilities at the terminals (and not via truck through the terminal gates), is for a workable VGM process for such cargo. HMM and K-Line have announced an acceptable resolution this challenge; the AgTC is working closely with all other lines to hasten adoption of similar on-dock process, as bookings for sailings post-July 1 are already well underway," said Friedmann.
Under the new VGM requirement, shippers are required to provide the weight of loaded export containers before they are loaded onto the vessel under an amendment to the IMO's Safety of Life at Sea convention. The process allows for weights obtained at US ports and marine terminals to be used as VGM on behalf of shippers. A key condition of the use of the TWA is that equipment used to obtain these weights must satisfy US regulatory requirements as described in the so-called "equivalency statement" in the US Coast Guard Maritime Safety Information Bulletin (009/16). OCEMA said after the bulletin was issued, it contacted the Coast Guard to confirm terminal weighing procedures and practices would be consistent with the VGM equivalency determination.
"As a result, the TWA contemplates that marine terminals will provide gross container weights directly to ocean carrier stowage planners as VGM on behalf of shippers," OCEMA said. Under the TWA, shippers" verification of VGM is set forth via carrier tariffs and/or marine terminal operator schedules. OCEMA said that it has "adopted tariff language for its members addressing the TWA. A key benefit of this feature is that shippers will not be required to perform any additional actions in order to provide VGM." OCEMA is an association of 19 major US and foreign flag international ocean common carriers that provides a forum for its members to discuss safety, operational and related matters pertaining to the intermodal transportation of ocean freight within the United States.
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