No-show fines ‘a potential nightmare for freight forwarders’

6/21/2017

The introduction of ‘no-show’ fines by several shipping lines presents major potential problems for freight forwarders but may tackle a longstanding problem within container shipping, according to online freight forwarding company iContainers.

In recent months, shipping lines including Maersk, CMA CGM, and Hapag-Lloyd have begun implementing no-shows fines on shipments that fail to show up on vessels. iContainers warns that such a fee, while the right move for lines, could result in ‘accounting nightmares’ for ocean transportation intermediaries (OTIs) – NVOCCs and freight forwarders.

“For freight forwarders and NVOCCs, these fees could become a much bigger challenge as we do not necessarily control the cargo we are booking and often have no control over a client cancelling at the last minute,” says Klaus Lysdal, vice president of sales and operations at iContainers.

Under CMA CGM’s implementation, the booking party is responsible for paying this fee, which could spell danger for freight forwarders, Lysdal noted.

“The OTI community will have to prepare itself,” he warned. “OTIs should consider implementing policies to prevent potential accounting nightmares that could leave them stuck with cancellation charges.”

iContainers acknowledged that a fine aimed at compensating carriers for their costs was a valid attempt to tackle a longstanding problem within ocean freight. “No-shows cause huge costs for carriers, as they often have to lower rates as a last-ditch effort to fill their vessels, and this may cause them to lose money,” the company noted. “To put it into perspective, Hapag-Lloyd estimates that around a quarter of its bookings fail to load as a result of no-shows.”

The company said “the no-shows problem” had “been plaguing the ocean freight industry for years”, and this wasn’t the first time lines have tried to introduce such a fee. Despite this, Lysdal voiced optimism about the latest implementation.

“The no-shows fine is a step in the right direction from the carriers,” he said. “Certainly, from their perspective, it’s strange that they have never been able to implement charges like these in the past. But now that there are fewer carriers to choose from, the chances of these fees sticking around have greatly increased.”

The company said it would take some time to verify whether the latest move to curtail no-shows had achieved its purpose. According to iContainers, more drastic steps may need to be taken, if the new implementation attempt fails, that may relieve the long-standing issue, but at the same time cause more pressure on shipping lines.

“If this fails to work again, the next step in the process may be to follow what airlines do and demand payment at the time of booking,” said Lysdal. “This would certainly ease the burden on the carriers’ planning.

“But it would also increase the demand for them to deliver in terms of space and equipment, and quite possibly increase sailing schedule integrity and dependability.”