United States

SOLAS Requirements, Panama Canal Expansion to Impact Industry

By Ronald Marotta, Vice President, Origin Cargo Management, International Division

What are some of the biggest challenges facing the industry today?
 
The SOLAS (Safety of Life at Sea) container weight verification requirement is one of the biggest challenges facing the shipping industry, at a time when there are no shortage of critical industry issues. Under this mandatory rule, packed containers must be weighed and receive a verified gross weight certificate (VGW) - weight can no longer be estimated. Prior to boarding, shippers, BCOs and NVOCCs must provide the VGW certificate to the ocean carrier and port terminal operator. Containers without a certificate will be prohibited from loading onto a vessel and/or gate into the terminal.


While the requirement is intended to improve the safety of container stowage and ship operations, it remains unclear as to how it will impact the supply chain and possibly disrupt the flow of cargo. There is still a lot of uncertainty around the policies and procedures that are yet to be established and many believe that the shipping industry will barely be ready by the July 1, 2016 implementation date. In a hearing by the Federal Maritime Commission, the U.S. Coast Guard said they will not enforce the new regulation, and shippers, carriers and logistics providers will have to figure out how to manage the requirement and its impact on their operations.
 
At Yusen Logistics, we take this issue very seriously. While it’s not 100 percent clear how the regulation will be imposed across our industry, we have modified our systems in terms of visibility and tracking and are prepared to record the extra information that is required for compliance. We are going to roll this out as smoothly as we can as a member of the global trade industry.
 
Another challenge is the further consolidation among ocean carriers as they continue to struggle with overcapacity and sinking freight rates. Within the past few months, a few notable mergers and alliances have been announced. The Chinese government recently combined China Ocean Shipping Co. (COSCO) and China Shipping Container Lines (CSCL) which will operate as China Cosco Shipping Corp. and be managed out of Cosco’s headquarters in Shanghai. This carrier is now one of the leaders in capacity and size in the world.

CMA CGM SA will soon close the deal on the acquisition of Neptune Orient Lines (NOL) which operates as APL.

There are rumors of consolidation among other Asian-based carriers, as well issues with the Korean carriers.  Liner carriers are all members of alliances today, and as we get into 2016 and 2017, the alliances may be changing members and structures and their sailing rotations will all need to be adjusted.
 
While the mergers and alliances enable these companies to lower their operating costs and trade up to larger ships, there’s uncertainty for the shippers as there are less sailing options available.
 
Can you give us an update on the Panama Canal expansion?
 
We’re getting to the final stretch of the Panama Canal expansion, which will have a significant impact on how cargo moves throughout our country, and this expansion will allow larger vessels to call on East Coast and Gulf Ports. The new sets of locks, which will double the canal’s capacity and create a new lane, are currently being tested and we’re waiting to see how that goes. There were some initial problems with leakage and cracks but they’ve since been repaired.
 
Ports across the eastern seaboard are getting ready for the additional traffic and larger ships, dredging harbors, adding larger port cranes and constructing reinforced terminal berthing space. Ports in Miami, Norfolk, Baltimore and New York already have channels deep enough to handle the mega ships, and the others are getting there. The Port of Savannah, which will serve as a key gateway to Atlanta, is well underway in deepening harbor waters for the big ships. Not all of the ports will be ready when the canal opens, however, so there will be some rough patches. For example, the Bayonne Bridge rebuilding project, which will increase the height of the span to allow taller ships to pass through, is behind schedule and will not be able to accommodate larger vessels until late 2017.
 
The canal expansion offers many advantages for the trade, enabling trans-ocean shipping and simplifying routes. It’s going to take some time for ports to get their landside operations ready and for all the proper-sized cranes to be delivered and installed. Within the next year or two, however, we will begin to see a phase in of the larger ships calling on the East Coast. We expect that it will go off without a hitch.

 

About Ron:

Ron began his career at Yusen Logistics/NYK Group more than 23 years ago. He graduated from St. Peter's College with a Bachelor of Science in Marketing Management. He has participated in numerous U.S. Government training sessions, industry training events and a variety of educational programs throughout his career.