The Deringer Difference

    The Shifting Global Logistics Footprint from COVID-19

    Posted by Chris Brennan on May 4, 2020 8:16:22 AM


    Global shipping and trade since the coronavirus emerged have done a complete 180. 

    Just two months ago, canned shipments out of China prevented commodities like toys, textiles, electronics, and auto parts from reaching North American destinations. Today, the goods arrive, but there’s no demand for them.

    The global spread of the coronavirus has led countries to close their borders, shutter non-essential businesses, and require citizens to stay home. These measures create a slump in demand. 

    The lack of demand has a domino effect. 

    Retailers leave their goods in port because their stores are closed. Their warehouses are full, so goods then pile up in port warehouses. When more goods arrive, there’s no place to store products, let alone incoming containers. 

    These containers sit on truck chassis, which are in limited supply. As shipments keep coming in with nowhere to go, ports then run out of chassis for the arriving containers. In turn, ports and carriers issue daily chassis fees, and detention and demurrage fines, in an attempt to get containers back in service.

    When containers sit idle, it also impacts exports. During the China shutdown, very few containers made it to places like Kansas City, Chicago, Omaha, and other areas in middle America. Now containers arrive, but cargo holders cannot empty them to load them with goods for export. 

    Likewise, some U.S. companies shut off their purchase orders from Asia, meaning fewer containers are coming in. All of this contributes to the need for carrier alliances to adjust capacity. As a result, blank sailings are soaring. 

    As of the middle of the month, The Alliance canceled 32 sailings in April on Asia-Europe, trans-Pacific and trans-Atlantic routes; the 2M Alliance withdrew 21% of its capacity from Asia-North Europe and 22% from Asia-Med routes. And Maersk announced blank sailings for five voyages from China to North Europe. Worse, experts do not expect the situation to correct itself for some time. 

    Ports Seek Solutions

    Ports and carriers are looking for new storage options as goods pile up in the harbors.

    The Port Authority of New York and New Jersey began talks with warehouse owners and operators to gauge their capacity. The Georgia Ports Authority opened additional space at its Savannah Garden City Terminal. Other ports seek to purchase adjacent land for extra container storage. 

    Carriers Step In

    But as ports look for solutions, some companies rack up thousands in chassis, detention, and demurrage fees. Carriers and ports levy these fees to ensure prompt equipment returns to free the containers and chassis for other customers to use. After a three to five-day grace period, ports charge demurrage. These costs range from $75 to $250 per shipping container, per day. 

    Ports and vessels—depending on who owns the containers—also charge detention fees when importers cannot return empty containers within three to five days. They typically set detention charges at $100 per container, per day.

    Additionally, carriers charge chassis fees to transport ocean containers from a port to a warehouse or a warehouse to a port. The rates vary by carrier and by the type and size of chassis required. 

    Carriers must get the containers off the chassis to return them to use. But if containers get stuck in port, they stay on these flat steel beds, which leads to daily chassis fees that wouldn’t occur under normal circumstances. 

    Carriers are stepping up to help importers avoid these costly fees. 

    • Singapore-based APL moves U.S. import containers and stores them in its storage yard. 
    • Maersk drays-off containers or trans loads goods into 53-foot containers. 
    • Mediterranean Shipping Co. (MSC) offers a Suspension of Transit program at transit hubs in Asia, the Middle East, Europe, and North and South America. Cargo owners can let MSC move and store their goods elsewhere to avoid detention and demurrage fees. 
    • Fenix Marine Services Terminal in Los Angeles allows carriers to store empty and loaded containers on an adjacent 40-acre tract of land. 
    • Hapag-Lloyd lets customers buy extra storage time upfront and move containers off the terminal.  

    Carriers are also doing their part to ensure essential goods get to where they need to be by offering Delay In Transit (DIT) options for non-essential goods. Companies use DIT to store their goods at a transshipment port. DIT saves money for shipments that no longer have a place to go. Storage fees in Singapore or Malaysia cost as little as $25 a day versus a $100 per day in the U.S.

    What to Do?

    There is little companies can do to prevent a viral outbreak from disrupting their supply chains, but they can reduce their risk by partnering with an experienced freight forwarder—if they haven’t done so already. 

    Freight forwarders arrange efficient and cost-effective exports and imports. They leverage established carrier relationships to negotiate competitive prices and select optimal shipping routes. And, freight forwarders help companies navigate the unknown, such as the shipping-impact of a global pandemic. 

    Companies should frequently communicate with their freight forwarder during this crisis. These experts can direct them to the best option, whether that’s parking goods in a transshipment hub, moving products to off-site storage, or selecting another carrier or another route.

    Though the global shipping and trade crisis seems dire as the coronavirus sweeps across the globe, an experienced freight forwarder is a lifeline that gets goods where they need to go.

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