With supply chains facing continued disruption from China’s zero-COVID policy, the war in Ukraine, and ongoing delays on most trade routes, 2022 remains a trying year for exporters.
This post covers the top four issues US exporters are experiencing in the current market. These include:
One: Last-minute ERD changes
A date set by the ocean carrier; the Earliest Return Date (ERD) is the first day an exporter’s loaded container can arrive at the terminal without incurring fees such as demurrage. Historically, and more frequently since the emergence of COVID, carriers would push out the ERD, if they changed it all.
But more recently, we’re increasingly seeing carriers, with little notice, advancing the ERD forward and compressing the amount of time available to return loaded export containers to the port. This typically means that the notice of the change provides exporters insufficient time to reconfigure their logistics plans to actually meet the earlier date. The result is missed opportunities to make the originally scheduled bookings and can expose the exporter to extra costs of $100 to $1,000-plus per container for trucking, chassis usage, storage, labor and more, especially if special equipment is involved. In addition to the strain on the exporter, these changes levy a heavy burden on other supply chain partners including freight forwarders such as Laufer. Each of these changes require shipping coordinators to rework each booking, often multiple times, with staff productivity drained in ongoing scheduling and cost juggling exercises.
If you miss a booking due to a last-minute ERD change, you can dispute any penalties with the carrier—but even this process is now ripe with uncharacteristic delays of weeks to months.
What’s causing these ERD issues? Basic vessel schedule unpredictability for carriers is reverberating down to exporters. In the current chaotic shipping market, ships are usually delayed, but sometimes they get into port sooner than predicted, or are offloaded faster. It is this unpredictability that is wreaking havoc in ERD’s and ultimately challenging exporters to bring their goods to the global market cost effectively and efficiently.
Two: Cancelled export bookings
It's one thing to request a booking and not get it due to space limitations or to get the booking and have it rolled to another vessel afterwards. But we’re now seeing ocean carriers cancel established export bookings immediately before or even on the same day as the ERD.
These bookings are not being rolled out to another future sailing. They are being cancelled outright with no replacement options provided by the carrier. When this happens, there is little an exporter can do except swallow any added costs and work with their forwarder to replace the cancelled booking with any available carrier that is often weeks or months further out. This can get especially complicated and costly if container equipment had already been dispatched for loading.
The root cause, again, is overall supply chain instability causing the ocean carriers to make sudden unilateral decisions like suspending services or temporarily discontinuing handling a commodity. Vessels being overweight is another justification given by the carriers. Often these dynamic decisions are not reflected on carriers’ websites, which show outdated information that exporters may find confusingly at odds with what they are being told.
Three: Capacity and space availability constraints
With US export volumes are at historic highs, exporters are now facing many of the same challenges that importers have been experiencing around capacity and booking space availability.
Often customers and prospects call Laufer wanting to have a “rate conversation” about meeting a certain rate for a booking. But these days, depending on the point of origin and trade lanes involved, the real conversation is about where and when space is available, and balancing wait times and unanticipated operational expenses on potential bookings against the business cost of longer departure delays.
For example, on the US west coast, ocean carriers might skip a smaller port like Oakland after calling in LA/Long Beach (reports say as much as 25% of the time). Additionally, some port locations may be experiencing shortage of equipment such as chassis. Factors like these can severely limit space and drive a need for creative thinking and quick moves, as well as forcing some exporters to accept a higher rate to get their cargo on a ship.
Four: Impacts from rising fuel costs
We’re all aware of fast-rising gasoline prices ratcheting up the cost to drive our cars. The same increases are impacting trucking and shipping, and those added costs are now quickly being passed on to exporters.
Laufer is seeing unprecedented fuel surcharges on drayage trucking of 50% or even 60% in recent weeks. The rising cost of bunker fuel to power container vessels is also leading to higher rates and more variability in rates, with fuel costs often being reviewed every two weeks instead of monthly. Therefore, exporters can now expect that the fuel charge component within the rates you are quoted today will often go up by the time the cargo is ready to load.
Next steps
With such high unpredictability and added costs across so many aspects of export logistics, times like these require a flexible approach and the ability to deliver customized solutions that fit specific scenarios.
Despite ongoing challenges, Laufer is consistently finding creative ways to move cargo and meet our customers’ needs.
We are here to help and have solutions that are helping other exporters now. Please contact Marc Van Gorp, National Export Business Development Manager or your local Laufer sales representative to discover what options are available to solve your ocean export challenges.