New Container Weight Rule Could Raise Shipping Costs, Congestion
Cowen and Co. says the time and complications from verifying the weight of shipping containers may boost costs from Los Angeles to Shanghai by 14%
ENLARGE
The International Maritime Organization mandate to verify container weights is due to be implemented July 1 even though there is no agreement among carriers and their customers on how the process will work. Photo: Bloomberg News
In an assessment released Monday of a rule that has roiled the container shipping world, Cowen and Co. said the total cost of shipping an ocean container from Los Angeles to Shanghai “could increase by approximately 14%” because of the extra time and expense that shipping lines and their customers face. Those costs may include fees for weighing shipping containers and charges for holding goods while information on the goods is collected and verified.
The report said apparel importers face the biggest potential impact when the rule takes effect July 1 since they will be moving new clothing lines to stores for the fall. Many of those importers may start shipping clothing by airfreight, which is far more expensive than ocean transport, to get around potential bottlenecks, the Cowen report said.
“Extended shipping times could result in greater airfreight usage for key back-to-school deliveries,” the report said. “And potential inventory markdown or cancelled orders risk from delayed shipments.”
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Currently, companies only must provide an estimate of the weight of goods when handing off shipments to shipping lines or third-party handlers. That has led to improperly loaded containers, regulators say which can lead to collapsing container stacks at sea and potentially catastrophic damage to vessels.
Although the weighing is seemingly simple for any one container, the requirement adds a new wrinkle to logistics operations that may handle hundreds of shipping containers at busy ports on a single day—potentially added daunting complications across shipping networks.
The requirement has left carriers and groups representing retailers and manufacturers pointing fingers over the responsibilities and expense of meeting the mandate. The shipping customers say it is unfair to require them to foot all of the additional costs and liability.
The Ocean Carrier Equipment Management Association, which represents carriers, released its own analysis of the rule on Monday and said containers should not be loaded if shippers haven't submitted the verified weight information to carriers.
Shipping intermediaries such as freight forwarders stand to benefit from the new rule, the Cowen report said, as shippers will likely call on them to help manage the changes.
Carriers are working to upgrade their electronic communications with shippers so that weight information can be transmitted more easily, and some companies have offered solutions, including on-demand weighing services and weighing equipment. But none of the solutions have addressed shippers’ concerns about added costs.
