Dive Brief:
- Hapag-Lloyd will resume booking cancelation surcharges of $40 in the ports of Hong Kong and Macau, according to the Journal of Commerce.
- The surcharge aims to discourage overbookings and no-shows in Asia, where carriers often face the violations at an elevated rate of 20% to 30%. Hapag-Lloyd had attempted a similar move five years ago, but the Journal of Commerce reports it was quickly withdrawn.
- Reports indicate other lines are considering similar surcharges, but nothing has been formalized. Regardless, the move is unpopular among shippers since the carrier does not commit to a reciprocal penalty for similar failures.
Dive Insight:
Hapag-Lloyd's decision to impose the surcharges may just be a way to secure additional revenue in face of historically low rates. Penalty surcharges are rarely taken into account when shippers consider competing carriers, but as FedEx and UPS show, they can add up to an important source of revenue for those imposing them. Supply chain managers are right to be concerned, however, since the charges could also add up to significant, previously unseen costs while carriers take no responsibility.
If the carrier's arguments for the surcharges are taken at face value, however, discouraging no-shows and cancelations would likely benefit the supply chain in the long run. No-shows and cancelations mean the carrier must often deliver shipments under capacity. Optimizing capacity is the first step to ensure accurate forecasting and a necessary step before correcting over-capacity.
At minimum, such surcharges allow the company to budget a buffer for less-than capacity shipments and recover some of those losses. That said, the surcharges are only a pilot in select ports in Asia, and largely a problem for freight forwarders in that area.
