No-show Fine Could Cause Nightmares for Freight Forwarders
The recent implementation of no-shows fine by shipping liners could potentially cause ‘nightmares’ for freight forwarders, says online freight forwarding company iContainers.
In recent months, shipping liners 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 liners, could result in ‘accounting nightmares’ for OTIs and NVOCCs.
“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 canceling at the last minute,” says Klaus Lysdal, vice president of sales and operations of iContainers.
Under CMA CGM’s implementation, the booking party is responsible for paying this fee, which could spell danger for freight forwarders.
“The OTI community will have to prepare itself. OTIs should consider implementing policies to prevent potential accounting nightmares that could leave them stuck with cancellation charges,” warns Mr Lysdal.
The fine is aimed at cost compensation. 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. To put things into perspective, Hapag-Lloyd estimates that around a quarter of its bookings fail to load as a result of no-shows.
The no-shows problem has been plaguing the ocean freight industry for years and this isn’t the first time liners have tried to introduce such a fee. Despite that, Mr Lysdal has voiced optimism at the latest implementation.
“The no-shows fine is a step in the right direction from the carriers. 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,” explains Mr Lysdal.
It will take some time to verify whether or not the latest move to curtail no-shows has achieved its purpose. According to iContainers, more drastic steps may need to be taken if the new implementation attempt fails, which 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,” says Mr 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.”