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Preventing cargo abandonment
This results in tens of thousands of dollars in accumulating demurrage costs, containers out of circulation not generating revenue, tens of thousands of dollars in freight charges to return the cargo to the load port and if no new buyer is found or the shipper has gone out of business, the shipping line must pay to dispose of the cargo. It is also likely that the ocean freight was not paid adding to the losses. Surveyor costs could be incurred if the shipping line must verify the commodity and legal costs incurred if the shipping line seeks legal advice or must take legal action to recover these costs.
What preventions can shipping line take to avoid these situations from developing and turning into huge economic losses?
The easy solution is not to accept bookings of low value waste products. But since 50% of export containers are shipped empty, shipping lines count on these high volume bookings to help offset the empty repositioning cost.
Therefore, if shipping lines must accept this cargo, they must do so with very strict internal controls in place to prevent unscrupulous shippers from making bookings.
Shipping lines should only accept bookings from reputable shippers who have been in business for several years and have negotiated rates on file with the shipping line. Bookings should never be accepted from a shipper who does not have rates on file with the shipping line.
Shipping lines should prepare an “Approved waste products shipper list” to be circulated to all employees to accept bookings.
Shipping lines who accept waste product bookings to China must request the AQSIQ “General Administration of Quality, Supervision, Inspection and Quarantine” registration number at time of booking. This registration number is confirmation that the shipper has been approved by the Chinese Government Authorities a to ship waste products to China.
In 2008, 2,124 registered scrap suppliers were approved by the Chinese Government Authorities and 770 registered overseas scrap suppliers were cancelled. The majority of the cancellations did not re-apply for registration. Shipping lines can check for approved and cancelled AQSIQ registration numbers at www.worldscrap.com/modules/aqsiq. Shipping lines should not accept bookings from shippers whose registration numbers were cancelled.
Shipping lines should not load containers on the vessel unless shipper has submitted the export declaration. If shipper has not submitted the export declaration, it is likely they have not sold the cargo and have a specific consignee. This increases the chances of cargo arriving at destination and becoming abandoned.
Shipping lines should also be cautious of bookings for used tires, computers/ monitors and phone materials as these products are the most costly to dispose legally in the US.
Shipping lines can take a proactive approach by asking their overseas offices to call the consignee to ensure they are in business and are aware of the booking.
Shipping lines can demand cash payment of ocean freight or run credit reports for shippers to ensure they have cash on hand and are not a bad credit risk. The credit report will also indicate if there are any lawsuits filed against them for previously abandoned shipments from other carriers.
For shipments that have arrived at destination and have been abandoned, what actions should the shipping line take?
If shipments have not been picked up or delivered within 30 days of arriving at the discharge port, shipping lines should advise the shipper and consignee in writing that they have 10 business days to pick up the containers and pay all outstanding charges or the shipping line will sell the cargo without further notice.
If the cargo is low value and the shipping line cannot find a buyer or dispose of the cargo at the discharge port, the shipping line should inform the shipper in writing that they are returning the cargo to the port of loading and are holding the shipper responsible for all costs incurred.
Once the cargo arrives back to the original port of loading the shipper must collect the cargo within the free time limit and pay all outstanding charges.
If the shipper has not collected the cargo within the free time, the shipping line should move the cargo into storage or dispose of the cargo immediately in order to avoid the costs escalating.
Once cargo is disposed of, the shipping line should consult with the Association on whether hiring a lawyer to pursue recovery of all costs incurred by the shipping line is cost effective.
George Radu, Thomas Miller Insurance Services (San Francisco)