Maersk promises refunds for rolled cargo
Maersk Line said last week it will pay customers a $10 fee for each container that is rolled on its TP8 export service, and charge a $10 “no-show fee” from shippers who make “ghost bookings” for containers that are booked and confirmed, but do not gate in on time.
The pilot program will begin May 1, and is limited to exempt commodity shipments only, but Maersk said it may choose to expand the project to other cargo types. It also said the pilot project will be specific to bookings loading on the TP8 export service string during the test phase, but might be expanded to other services as well.
“One of the key challenges in our industry is the effective management of booking fall-down,' or confirmed bookings that never materialize, the Danish carrier said. “Today, it is not unusual for over a third of our bookings not to materialize, and the figure is often even higher.” For a ship with capacity for 6,000 TEUs of cargo to sail full in today’s environment, Maersk said it needs to accept bookings for 8,000 TEUs because of ghost bookings. It said it believes those ratios “in line with industry fall down/overbooking rates.”
In a notice to customers, Maersk said it would begin a pilot program to “find mutually beneficial solutions to this problem.”
It said it will refund $10 for each container that has been gated-in on time for the originally booked vessel, but that does not load. It will also invoice the shipper of record $10 for each container that was booked and confirmed, but did not gate in on time for the original vessel. “Shippers can still change the number of containers for a confirmed booking three or more days prior to vessel cutoff without being charged a no show fee,” Maersk added.
The TP8 service has a westbound rotation of Los Angeles, Oakland, Dalian, Xingang, Shanghai and Ningbo, and utilizes six ships averaging 8,242 TEUs according to American Shipper affiliate ComPair Data. Mediterranean Shipping Co. and CMA CGM also participate in the string.
In its weekly newsletter to customers, Maersk said, “overbooking is not an ideal answer to the problem of fall-down, as it means you have to deal with cancellations, changes to vessel sailings, equipment problems and other challenges. More importantly, it means your cargo often has to ship later than it really needs to — as we can't load your cargo on a vessel that is 'full,' even if much of the booked cargo never materializes. And of course sailing underutilized vessels is costly for us.”
The Danish carrier said “the pilot project aims to more closely align the number of containers booked with the actual number of containers delivered to the terminal gate by cutoff and loaded onto the vessel. By rationalizing vessel capacity in this way, we hope to provide better, more predictable and more reliable service.”
Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC), some of whose members have expressed frustration about the availability of capacity for their export products, said there has been discussion of proposals similar to what Maersk has announced.
This would involve, he said, 'some regulation under the Shipping Act, whether there should be penalties for carriers who deny a booking once they have taken it.
'I would say in the current environment shippers would prefer those numbers be 10-20 fold,' of what Maersk has announced, he said, or even as much as a $1,000 penalty.
'In other words, make it a meaningful contract,' he said.
Without singling out Maersk, Friedmann said shippers have been frustrated with some carriers because of their ability to announced general rate increase on 30 days notice. Some carriers have been increasing rates rapidly in recent months with little notice, and he said such increases makes the rate clauses in contracts “meaningless.” Furthermore he said “when the bookings can be canceled or cargo rolled unilaterally, it makes the service element meaningless.'
'When a carrier takes a booking and then does not follow through, the shipper’s loss can be tens of thousands of dollars, but the carrier does not lose that much, because it is going to fill that space with another shipper's cargo. The shipper may lose a customer forever.'
Friedmann also said some shippers are making multiple bookings of space on ships as a backup in case they get cargo rolled or cancelled by other shippers.
The Maersk announcement came about a week after a congressional hearing where exporters and their representatives expressed frustration about difficulties getting containers and space on ships for their products.
The Federal Maritime Commission has also launched a fact-finding investigation of the issue, promising it would make a preliminary report in June. The FMC is also planning to report its results to the House Subcommittee on Coast Guard and Maritime Transportation in July.
The FMC is seeking comments from the public on the issue.
Richard Lidinsky, FMC chairman, said his organization is also working with the U.S. Department of Agriculture to develop a voluntary system that could be used for carriers and shippers to connect empty containers at inland locations to move export cargo.
Lidinsky noted that members of the Westbound Transpacific Stabilization Agreement are planning to hold a meeting in April with agricultural shippers to discuss capacity issues, and that the FMC has been invited to send representatives to the meeting.
But Chris Koch, president and chief executive officer of the World Shipping Council, said the problems exporters are facing 'is a market issue — for some shippers, when capacity is at levels it is today, they are facing some issues they have faced in the past.'
He said the primary issue facing exporters is getting containers to inland locations where they want to load cargo, 'but where equipment does not want to logically go.'
If exporters of agricultural products like grain want to regularly move it by container, he said they will have to commit to volumes and rates that will be attractive to carriers to position equipment at inland locations.
Koch also noted that ports such as Long Beach, which have capacity on ships for export cargo, are seeking to attract shippers who will move cargo by rail in bulk and transload it into containers in Southern California where empty containers are available. ' Chris Dupin