Market Matters Blog

Industry Still Seeks Clarification on Implementing SOLAS VGM Amendment

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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Canadian Pacific train of containers heading for export. (DTN photo by Elaine Shein)

With just a little over two months remaining before new rules for verifying the weight of shipping containers before they are loaded onto cargo ships go into effect, agricultural-product and other shippers still have many answered questions about how the new system will be enforced.

The International Maritime Organization (IMO) is a specialized agency of the United Nations responsible for developing and maintaining a comprehensive regulatory framework for worldwide shipping. In May of 2014, the IMO amended the Safety of Life at Sea (SOLAS) rules to require, as a condition for loading a packed container onto a ship for export, that the container has a verified gross mass (VGM).

Effective July 1, 2016, any shipping container leaving from any port in the world must be accompanied by a shipping document signed either electronically or in hard copy by the shipper on the bill of lading listing the VGM of a container in order to be loaded onto a ship. After that date, it would be a violation of SOLAS to load a packed container onto a vessel if the vessel operator and marine terminal operator do not have a verified container weight.

The SOLAS amendment, which will apply globally, provides two methods shippers may use to determine the container weight once the container packing process has taken place. Method one is weighing the whole container after it has been packed. For example, weighing the whole truck and container at certified weighbridge and subtracting truck and chassis weight. Method two is weighing all cargo and contents of the container individually, and adding those weights to the container's tare weight and factor in additional loading equipment weight, if any.

Shippers, freight forwarders, vessel operators, and terminal operators will all need to establish policies and procedures to ensure the implementation of this regulatory change. (A freight forwarder, forwarder, or forwarding agent, is a person or company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution.)

The problem facing the industry right now is that nobody really knows all the answers as to who is responsible for the official VGM. Midwest Shippers Association (MSA) Executive Director Bruce Abbe told me, "There is still a pretty alarming lack of communication and clarification from the ocean carriers on a practical, implementation level as to how this is to happen through the supply chain.

"We are now only 70 days today out from when the rule is to go into effect across the globe -- when shippers must file a verified gross mass weight of the loaded containers when booking shipping. There is still a pretty alarming lack of communication and clarification from the ocean carriers on a practical, implementation level as to how this is to happen through the supply chain.

"It's a pretty fluid situation," said Abbe. "Unless we get some clear, doable procedures in place for executing this, we could definitely see some major congestion and disruptions at some ports, and some significant added, unexpected costs for shippers. But frankly, there is no reason for this to happen. If the carriers just get the systems filing information out there, and if they clarify a few procedures and rules (like tolerances) there is no reason this can't be accommodated without any problems.

"It's important to remember, for the most part shippers are providing the key weight information of their container cargo now when submitting their shipping instructions," Abbe added.

Mike Hajny, vice president of Wesco International, Inc., a hay exporter in Ellensburg, Washington, agreed. He told me since they already weigh all their cargo at their facility, "It isn't a huge issue for us."

Hajny added, "One concern is if steamship lines will accept the empty container weight printed on the door, or will insist on an actual physical weight of the empty container. At this time, it appears they will all accept the door weight. If this is the case, the reporting will be a non-issue for us given our extensive and detailed database system. This will require another layer of data reporting to steamship lines, but it appears it will be manageable for us."

CONFUSION: WHO IS RESPONSIBLE FOR THE VGM?

According to IMO SOLAS guidelines, the new SOLAS amendment spells out clearly that the shipper of a container shall ensure the verified gross mass is stated in the shipping document. "The shipping document shall be signed by a person duly authorized by the shipper and submitted to the master or his representative and to the terminal representative sufficiently in advance, as required by the master or his representative, to be used in the preparation of the ship stowage plan."

The amendment clearly states that if the shipping document, with regard to a packed container, does not provide the verified gross mass and the master or his representative and the terminal representative have not obtained the VGM of the packed container, it shall not be loaded onto the ship.

Abbe told me there is "implied liability" in these rules that would seem to put that liability all on the shippers. "The shippers have always been prepared to submit the weight of their cargo (we do now) ... but don't feel we should have to submit (have liability) for the combined, added weight of the container equipment ... which the carriers own," said Abbe. "Testing has shown that the posted "TARE weight" on the sides of containers are often off from actual weight. The equipment often has been repaired changing actual weight, or it just wasn't accurate. While that may seem like what should be a minor difference, the carriers simply haven't specified any acceptable tolerance levels here in the U.S."

HOW WILL AG SHIPPERS BE AFFECTED?

Most ag shippers will use "method 2" set by the IMO, Abbe said, whereby they determine the weight of their cargo and add in the weight of the container and submit the combined VGM. Abbe said the carriers should be doing this themselves but "don't expect it; they'll keep the onus on the shippers if they can."

"For many grain, soy and DDGS export container shippers, it ought to be relatively easy to submit a 'verified' cargo weight because ag/grain elevators and facilities use a certified weighing scale, already," said Abbe. "Not all other container shippers have this to use." Abbe added, "Identity preserved (IP) soybean exporters like many MSA members that load bags or super sack totes, also know the weight of their cargo now. When they load them at their plant, they're sure of what they load."

However, Abbe noted that bulk grain, DDGS, and soy exporters that ship rail cars to the coasts where it is transloaded into containers, face some added challenges. "The actual container is loaded by someone else, a logistics service provider. So, since the shippers are to be held responsible -- but someone else is loading it -- I see a likely need for some amended language in service contracts to clarify these matters. This is one of big concerns; such a lack of information on how to implement this so close to deadline."

"Our MSA grain transloader members also have scales and can and do provide weights now in existing processes. But, again, what constitutes 'verified' in their eyes has folks concerned."

For most grain container shippers, the max weight is determined by federal highway trucking weight limits, and those are well below what the max is for the ocean carriers and railroads. "But for some who may have their grain loaded near a rail ramp or port that may be in a 'heavy weight' trucking corridor, they will need to make sure they are within the allowed weight levels. No one should be overloading -- now or after July 1. But terminals now do check weights and at times catch and reject some, as they should," Abbe said.

What are the tolerances? "There hasn't been any announcement of recommended tolerances yet that I am aware of for the U.S.," said Abbe. "Ag products, grain in containers, chilled products, often will see small weight changes for moisture that can develop while in route in containers when going through rain, humid or dry conditions.

"Hong Kong, the U.K., and Japan have set a plus-or-minus 5% tolerance level, while India has adopted a weight tolerance of plus or minus 200 kilograms (441 pounds), according to the Journal of Commerce," added Abbe. "That would be considered very doable here for ag shippers. But no indication yet."

For anyone unaware of all this and then sends containers that arrive at the terminals without a VGM filed on July 1, there does not seem to be any consistency or clarity as to what will happen. "And, it appears to be different at different ports," Abbe said. "We know it will be a "No VGM/No load" situation; the container won't be loaded on the vessel.

"Some port terminals have said they'll stop the containers at the gate if they don't have a VGM. So the trucker and shipper/forwarder will have to figure something else out. Take it somewhere undetermined or figure out how to get a verified weight done and submitted. Other ports have said they'll let the container in and will hold it somewhere on the side for a period of time. There are likely demurrage costs coming in those situations; notable cost penalties," said Abbe.

"Our concern at this point is that we are getting too close to the deadline time for these procedures to not only not be communicated to the whole supply chains that serve these carriers, but also to not have their actual implementation procedures put in place." Abbe told me that according to the American Shipper poll, nearly 60% indicated they did not understand how to comply with the VGM rule.

"We are expecting most carriers will enable an electronic data information (EDI) system to be put in place. At least three software providers for shipping documentation filings that freight forwarders use are developing VGM filing means. And carriers presumably will offer something like this in their own booking systems, but it hasn't come out yet."

Abbe said that an MSA forwarder member told him this past week that he has asked eight carriers when their systems for VGM filings will be out, and they all said, "When we know, we'll let you know."

A friend of mine who brokers ag containers told me that, basically, the new regulation is another layer of reporting and time requirements. He said that when you add it to security requirements and the compliance to the new FSMA rules, it all conspires to make things more difficult to export. He told me, "I am glad I am getting close to retirement."

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(CZ/AG)

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