Carrier turnaround time: Every part of the export transaction is severely delayed. Whether it's making a booking, getting a rate, filing a rate, getting a proof bill of lading, getting an original bill of lading - everything is delayed. These days it is taking up to 1 to 2 weeks to confirm pricing and bookings that were once completed in hours now take up to two to three days to confirm.
The issue with empties: Carriers continue to prioritize the return of empty containers to China instead of taking containers loaded with US Exports. For example, in March this year, 623,000 TEUs of empty containers were returned from LA/LGB compared to 233,000 TEUs the same month last year – a 167% increase.
Rail issues and Storage fees: Costs for storage have increased greatly because of the congestion, so many yards are beginning to increase their storage fees. This has been leading to problems at the West Coast, East Coast and Midwest where terminal yards and ramps become full and close their gates so that equipment cannot be returned. Some Midwest ramps in Kansas City, Memphis and Chicago are now fixing daily allocations for returning containers. Beginning at 12:00am each day, these are usually filled as early as 4am at some locations. Once filled, the gates are closed, and truckers are being turned away.
Service Cancelations:
In combination with the extreme congestion at transshipment points and in order to drive containers to China and Vietnam, carriers are cancelling anything that is not making a direct port call to these destinations.
So, what is an exporter to do? We asked our ocean export experts for recommendations, and they have come up with four things exporters can do to survive this mess.
1) Be a Shipper of Choice
This is a term that was often used back in 2018, when the trucking ELD mandate was rolled out. At that time, the focus was on domestic trucking, but the concept is relevant for almost any mode of transportation and, especially now, with export ocean carriers. The essence of the concept is to ensure their freight moves efficiently and timely, shippers must proactively work with their carrier partners to be flexible with their shipping and receiving times, communicating changes, and advising any cancellations in advance, and most importantly providing future forecasts that will enable their partners to plan better. All are important but flexibility is especially critical right now. Whether that is loading dates, shipment routing or reducing the number of days of free time at origin or destination - anything that can return containers quicker. It's never been like this for US exporters - it's not about the lowest rate anymore, in fact it's becoming less about the rate. Now it is all about capacity. Export shippers are realizing if they are to move cargo in this environment, they will not be competing for rates but really competing for space and equipment.
2) Street Turn those import boxes
Work with your logistics partners (freight forwarder and truckers) to identify import containers in locations where you are loading your exports to help secure equipment. With today’s equipment challenges and carriers prioritizing sending empties back to Asia, if you can secure that empty before it goes into the terminal for Asia as an empty, the odds of moving that export cargo vastly improve. Have a conversation with your forwarder and look for opportunities where you can participate in a street turn program.
3) Change of mindset to allocations and guarantees
For exporters with regular repeat business and who can forecast their export booking requirements in advance, there is an opportunity to talk about allocations with ocean carriers. We are seeing the ocean carrier’s appetite to provide these regular weekly allocations grow and grow. Securing committed allocations is a huge success for exporters because bookings are significantly easier to obtain when an allocation is fixed for an exporter. Once established that allocation security provides an exporter the ability to plan with the assurance that their cargo will move.
For higher value cargo that absolutely must move exporters should consider guaranteed service products that many carriers are offering. Through marketplaces such as NYSHEX and through some carriers including Hapag Lloyd, Maersk and CMA there are opportunities to book cargo using a premium service to guarantee equipment and space. As importers are also finding out, besides the premium price, these services do come with penalties such as cancellation fees which can be a very new concept for many exporters to grasp.
4) Provide Forecasts
In the past, an exporter could call up and make a booking with a cut off the following week. In that environment it wasn't necessary to have a forecast because equipment and the vessel space were generally readily available. In today's environment the importance of forecasts cannot be overstated. Providing forecasts enables your forwarder to make advanced bookings with carriers and helps the exporter to plan their supply chain by knowing what bookings are available.
In this market the ocean carriers are expected to continue to prioritize imports over exports and there does not seem to be a sign of improvement coming anytime soon. Which means we must all adapt to this new environment. Working in combination with our clients and other logistics partners we are charting ways through this mess and finding successful solutions. Whether that is through allocations, forecasts, being a shipper of choice, a combination of some or all these approaches - it is really all about communication and partnership. If you are facing similar challenges, let's have a discussion and determine where and when to start. To see how we can help, or for any questions, contact Marc Van Gorp, National Export Business Development Manager, or contact your local sales representative
