Dive Brief:
- The European Shippers Council (ESC) said carriers should compensate shippers suffering from cargo rollovers at ports, The Loadstar reported Wednesday.
- However, the ESC also said shippers should be subject to short-notice cancellation and cargo no-show fees.
- Yet, some freight forwarders and carriers still recommend overbooking. The ESC noted the senselessness of this, urging shippers not to overbook so they don't get charged for a no-show.
Dive Insight:
The issue of no-shows and overbooking exemplifies two structural issues within the shipping industry: a lack of communication or trust between shippers and carriers, and a failure to forecast capacity accurately.
In theory, these issues would not exist at all considering each ship has a determined number of slots to fill, and containers are rarely filled without extensive planning. In other words, shippers know just how much they need to ship on a specific route at any given point, and carriers know just how much capacity they can afford to carry.
However, a shipper's late cancellation or the absence of cargo sets in motion a chain of events that degrades the carrier’s bottom line. It's not a problem with a single shipper, but it becomes a tragedy of commons when shippers take advantage of carriers' seemingly-generous cancellation policies. Then, when a carrier overbooks to compensate, regardless of whether there's an ultimate roll-over, a vicious cycle is created, leaving both parties frustrated and in the red. According to Freight Hub, some carriers overbook up to 50% of ships. Both sides cheat; both sides suffer.
The ESC's call to accept fees, such as the ones recently imposed by Hapag-Lloyd and CMA CGM, is a step in the positive direction to fix this issue. However, the underlying problem would be fixed is capacity was forecasted more accurately — but that would require efficient communication.
