International Trade

The Virginia Maritime Association (VMA) Conference

The VMA conference provoked many questions about the potential anti-competitive behavior with ocean carrier alliances (see The Alliance)… And lets not forget SOLAS - you only have 6 weeks. The Virginia Maritime Association (VMA) Conference held this week covered a wide range of topics. But if there were one abiding message to be derived from the VMA conference it would be that more uncertainty is certain when it comes to the ocean carrier industry. The eager crowd of shippers and supply chain professionals were all looking forward to the SOLAS conversation, which had the conference room packed. Art Moye, executive vice president of the Virginia Maritime Association commented, “At nearly 400 participants we were pleased with the numbers and the level of executives that contributed to an open and constructive dialogue around the issues presented.” Congestion issues, carrier alliances and SOLAS are still hot topics within every part of the supply chain. The Federal Maritime Commission (FMC), International Maritime Organization (IMO), World Shipping Council (WSC), shipping lines and ports are all trying to clarify these issues, but it seems with every conference and press release trying to clarify an issue they cloud the waters even more. Congestion The congestion issues of the past seem to be under control as the ports have made great improvements by working with the shippers, supply chains providers and shipping lines. But while these changes have yielded improvements they have yet to be fully tested. To add to the unknown, ports such as Virginia, are expecting 14,000 plus TEU ships to start making port calls this year. Port of Virginia has said that they are well equipped to handle these larger vessels stating they now currently handle 10,000-12,000 TEU vessels without issue. With the Panama Canal expansion, the deep channeled East Coast ports could be challenged. For now the current slow trade conditions are keeping congestion at bay, but we will have to wait and see how these changes benefit the congestion issues when the economic conditions rebound. Stakeholder communication still an issue Logistics Coordinator for Hooker Furniture Corporation Kimberly Clark was not shy up on stage with regard to working with the port to come up with solutions. The big concern is still communication and asking the port for more information to be available online so they would be better able to coordinate the cargo transportation off dock. Larger ports on the West Coast currently provide this information on their websites, and having information about the ship’s schedule at the port is vital to their ability to coordinate the cargo on and off the ships. The alliance issues are still a hot topic, and with the announcement of “The Alliance” today, shippers are still concerned about the potential lack of competitive behavior and collusion. “The jury is still out,” according to FMC Chairman Mario Cordero on whether the alliances will be beneficial to the shipping industry. The “orphaned” shipping lines are thought to be possible beneficiaries of all the alliances in the long run, and the ports not in the major alliances’ rotation may also be able to take advantage of the situation. Of course this is all theoretical, and we will have to see how it all plays out. Shippers are focusing on keeping it diverse portfolio of services, working with both the alliances and the independent lines to ensure a balanced approach that can meet all of their needs while avoiding any issues in the long term. SOLAS: One thing is still clear - the SOLAS regulation isn’t. Peter Freidmann of the Agriculture Trade Coalition (AgTC) livened up the lunchroom with some political fire on the most eagerly awaited discussion on the new container weighing regulations starting on July 1, 2016 under Safety Of Life At Sea (SOLAS). His statement “this has nothing to do with saving lives” was quick to get the attention of the crowd, who at this point are all frustrated with the entire regulation and its uncertainty on how to prepare for it. The history: OSHA has regulated container weighing since the 80’s, and the Coast Guard announcing that the current weighing processes already meet the requirements. However, this is between the shipping lines and the shipper, and the shipping lines are making the stand they will not load a container without a certified weight.
Joseph Ruddy - Port of Virginia, Ashley Craig - Venable LLP, Murray Bishop - STIHL Inc., Curtis Struyk - TMX Shipping and Carolina Ocean Lines, John Fay - INTRA
Joseph Ruddy - Port of Virginia, Ashley Craig - Venable LLP, Murray Bishop - STIHL Inc., Curtis Struyk - TMX Shipping and Carolina Ocean Lines, John Fay - INTRA
The SOLAS conversation continued into the afternoon’s panel. Ashley Craig, Venable LLP, immediately went on record that he completely disagreed with Friedmann’s comments, and that the weight issue “is nothing new” and has been in the works for many years, just now coming to a port near you. Peter Freidmann contributed to the conversation from the floor. The topic of Method 2 brought some ease. Shippers use that method under the current regulations that gives a general weight that is fairly accurate. Countries around the globe have wide ranging tolerances from 3.5% to as high as 10%, with no word on what the repercussion will be for being out of range. And who will be liable for a container weight being too low, or what entity will be enforcing the rules. We know it won’t be the U.S. Coast Guard. Some shippers still don’t have a plan to handle SOLAS due to all the unknowns. It’s like trying to hit a “moving target” according to Murray Bishop, Manager, Export and Logistics for STIHL Inc. Bishop stated he has purchase orders on his desk to get scales and related equipment in order to handle the changes, but even at six weeks out they are unsure on whether to pull the trigger on the capital investment. “I wish I knew,” Bishop stated on multiple occasions, which was exactly why the room was packed and energized - they all wanted answers, and left with more questions.
Eric Nelson

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