It’s shipping’s ocean container contract signing season for many! Coming off of the unprecedented turbulent happenings in the supply chain over the last couple of years, now high inventories and tough economic conditions coupled with high inflation means even industry veterans need to proceed cautiously.
When considering signing container ocean contracts in 2023, there are several important factors to keep in mind. One of the most critical considerations is the container shortage caused by global supply chain disruptions and the pandemic. It's essential to determine the availability of containers and negotiate for a specific type/size or consider other transportation options. Ensure that an ocean carrier’s supply of containers for various trade lanes is clear and really push the ocean carriers to demonstrate how they plan to forecast demand vs supply of these containers. If working with NVOCCs (Non-Vessel Operating Common Carriers) or Freight Forwarders, ensure you understand their ocean carrier procurement strategy and drill down to these questions to ask of their ocean carriers.
Another important factor = freight rates. The cost of shipping by container varies based on multiple factors, including the type of cargo, the shipping route, market conditions, fuel/bunker schedules, etc. It's essential to review the freight rates carefully and compare them with other shipping options to ensure a fair price. Ensure that you are looking at freight rates “apples-to-apples” by understanding all components, i.e. local origin charges, freight rate base, bunker charges, and additional destination as well as auxiliary charges. Ensure that Peak Season Surcharges, General Rate Increase Terms, and free time/terms for demurrage and detention are addressed in your RFP/contract boilerplate. Get creative! Ask for the stars, maybe you will land on the moon!
Carrier schedule reliability is also a significant consideration when signing container ocean contracts as is the schedule reliability of the consortium or alliance the ocean carrier is part of (where applicable). Choosing a carrier with a good track record of delivering cargo on time and in good condition is vital. Additionally, researching the carrier's financial stability and safety record is essential. Understand what the carrier’s policies are for cargo claims, liability guidelines /standards, and general risk management so you can ensure you have the correct insurance protections required to supplement.
Also, understand for mini-land bridge (MLB) or bundled moves to interior rail points through the ocean carrier’s contracts with the rail lines such as Union Pacific and BNSF, what kind of capacity commitments the ocean carrier has for various trade lanes, and what kind of assurances you have for smooth shipment of your cargoes to those destinations. Ask the ocean carriers how they plan to handle “stacked” or unavailable containers at rail if unfair demurrages are levied against the importer. This was a huge problem during the supply chain crisis period. Ask the ocean carriers what the “caps” or max charges are that are applicable to importers. How will the ocean carrier fight for you for unfair happenings? Try to get this in writing.
Port congestion was a common theme that caused delays and additional costs when shipping by container. It's essential to take into account the congestion levels at the ports along the shipping route and plan accordingly to avoid any potential issues. This includes rail.
Finally, environmental regulations continue to grow in importance. New regulations related to container shipping may be introduced that you need to be aware of when signing ocean contracts. Understand IMO 2023 regulations and ensure carriers have a plan. Staying up to date on these regulations is crucial to factor them into your decision-making process.
Remember when considering the lanes or shipping destinations, ensure you are load balancing for your network to optimize your final delivery costs. This includes having points to your transloading facilities/cross-docks, distribution centers, and where applicable, direct container delivery locations.
By taking all of these factors into account, you can ensure a successful and cost-effective shipment of your cargo.
Sincerely, CEO Hard Deck Logistics