COVID-19, has changed the way this world works and is expected to continue to influence the movement of global economies, human resources, the medical field and supply chain for the foreseeable future..
As at the time of writing of this article, the global number of infected people was around 2.38+ million with 164,000+ dead which is around 6.88% of the total infected..
Several ports around the world were/are either closed or working under limited conditions with several restrictions imposed on normal port activities.. Global trade has been severely impacted and is undergoing strain as never before..
Our industry plays a highly highly pivotal role in ensuring that the flow of goods continues, especially the flow of critical and essential goods all around the world..
While this happens on one side, there are also cases where non-essential or non-critical goods are being shipped to and from various countries.. While some countries like China are reopening other countries are shutting down and there are several goods stuck in between ports due to this..
Due to this lockdown and the above mentioned reasons, many importers in many countries are facing problems to pick up their containers from the port in time..
This could be due to port congestion caused by vessel berthing delays due to limited labour or government regulations that does not allow them to pick up non-essential goods or the relevant documentation hasn’t reached the customer to secure cargo release from the shipping line..
Whatever the reasons, this a major inconvenience to all including the consignee and the ports not to mention some of the shippers who may have shipped goods based on Incoterms® that necessitate cargo delivery at destination before funds are received..
This is where some of the shipping lines have come up with some creative cost saving options..
Let’s see what these solutions are, how it will work and who can benefit from this..
As has been discussed previously, not all cargo moves from Point A to Point B directly and in a straight line..
More than 25% of the containers shipped around the world are transhipped at many of the global transhipment hubs..
Some of the lines like CMA CGM and MSC are offering customers the option to hold/store the import containers at some of these transhipment hubs in order to slow down the delivery of the imports in markets which are facing lockdown..
CMA CGM is offering this “Delay in Transit” option in 8 hubs along their global trade routes where they will store the containers for further delivery to the final destination..
- North Europe – Algeciras, Piraeus ;
- West Med. & Adriatic – Malta, Algeciras ;
- East Med. & Black Sea – Tripoli, Malta ;
- Latin America & North America – Kingston ;
- Africa – Tangiers Med ; and
- South East Asia & Pacific – Singapore, Busan
CMA CGM’s action follows that of the world’s 2nd largest container carrier MSC who was the first line to offer what they call “Suspension of Transit” programme..
MSC’s programme offers this temporary storage solution in 10 hubs
- Freeport, Bahamas ;
- Rodman Port, Panama ;
- Bremerhaven, Germany ;
- Klaipeda, Lithuania ;
- Tekirdag Asyaport, Turkey ;
- Gioia Tauro, Italy ;
- Las Palmas, Canary Islands ;
- Lome, Togo ;
- King Abdullah Port, Saudi Arabia ; and
- Busan, South Korea
Advising customers to be ready for the business that is coming back, MSC’s programme brochure said that “In our efforts to support our customers during these challenging times, we have developed a Suspension of Transit (SOT) container shipping programme to prepare for freight recovery and surging demands once the situation eases across the world.”
“The programme builds on our ongoing effort to ensure business continuity by maintaining essential services, thus contributing to the high priority transport of essential goods like foods, medical equipment and other vital supplies.” it added..
Maersk, the world’s largest container shipping line in the world is offering similar options at various origin ports in Asia..
But what was the requirement for this solution..??
Well, due to COVID-19 lockdown, many of the countries are only allowing essential-goods to be cleared and delivered to the receivers for use in fighting the pandemic and to keep certain aspects of the economy going.. Due to the nature of these cargoes, these are required on priority at various levels..
Many of the ports are working with reduced capacity to contain the impact of the pandemic.. Therefore, many non-essential goods like clothing, auto parts and some of the other retail goods have taken a back seat and these companies are not allowed to operate during the lockdown..
Because of this, these non-essential goods customers may not be able to take delivery of the containers from the ports, terminals or depots leading to severe backlogs in and around the ports of discharge which could impact on the movement of essential goods which are required..
How will this cost saving option work..??
The lines are clear on how this solution will work.. In simple terms
- BCOs decide if they require this option ;
- If they require this option and if their cargo is being transhipped at one of the above mentioned hubs, they can send a request to the line at the time of the booking stipulating the port of discharge ;
- The line will then hold the containers at the required hub ;
- When the customer at POD is ready to receive it, they can send a message to the line to release the hold ;
- Container(s) will be shipped to the POD as normal once all the charges at the hub has been settled
So what is the benefit and who benefits from these cost saving options??
The main beneficiaries of such programmes could be the BCOs (either exporter or importer depending on their terms of shipment) and also NVOCCs or Consolidators..
Ports of Discharge could also benefit from these options because this will help avoid the congestion caused due to the non-movement of non-essential goods..
The customer requesting this option will be responsible for the cost.. But as per the lines, these programmes allows the customers substantial cost savings and control over storage costs instead of the consignee facing unknown and uncontrolled costs at the POD such as port storage, demurrage, detention and warehousing costs..
CMA CGM’s brochure which explains this option says “In today’s market, you need utmost flexibility to ensure your supply chain easily adapts to changing conditions. With our Delay in Transit (DIT) solution, you can request temporary retention of your goods at a dedicated port/hub until your customer is ready for the cargo to continue to the POD. This enables you to control storage costs.”
This option is seen as a good one for the BCOs because it helps the customers avoid demurrage and detention charges at POD as the cargo is still deemed to be in transit and they will be liable only for the storage costs at the storage hubs..
Storage charges at transhipment ports may be lower than that of the final ports of destination as generally the transhipment hubs have larger yard space than regular ports..
But it also depends on the country of final destination and country of holding because costs can certainly vary from country to country and customers should take note of this fact in their calculations..
For all the troubles it might have caused/causing the world, COVID-19 seems to have brought about a new era of meaningful communication, interaction and cooperation among all role players in the supply chain..
Ports are being lenient in their approach to the situation that has gripped the world, shipping lines have announced reduced demurrage and detention charges for the containers and customers affected by the delays caused by COVID-19, carriers and terminal operators are offering to share their unused storage space for customers..
In some countries, Customs are relaxing the requirement of moving uncleared containers only to customs bonded facilities as they have run out of space due to many uncleared containers sitting in these facilities..
These and programmes such as above is proof that working together, we as an industry can protect the interests of many, save costs while still keeping the engine of global trade running..
Well done to us thus far and may this cooperation continue way after COVID-19..