PCB Freight Management’s logistics blog is a valuable resource for shippers, carriers, industry professionals and other supply chain partners navigating global trade. With the many regulations governing trade, it aims to help readers lower their freight costs, increase shipping efficiencies, address industry issues and manage their logistics activities. Several leading experts serve as blog columnists covering topics from freight, compliance and transportation to 3PL trends and warehousing.
The U.S.-China trade war has caused a stir in the freight forwarding community. With change comes uncertainty, and importers are finding out through their time and their wallets.
One of the byproducts of the trade war importers in North America are paying premiums to have their goods shipped from Asian markets to North American markets. New tariffs are impacting the supply of ocean containers travelling overseas to North America. Container ships are unable to keep up with the demand of companies trying to take advantage of the limited amount of time they have to transport their goods overseas before all of the tariffs come into play.
This imbalance between container supply and demand is causing container rollovers where certain importers are paying premiums to essentially bump other containers to ships sailing at later dates. Roll shipments will occur when customer demand surpasses the capacity carriers can load onto their ships. When demand surpasses capacity importers have to pay premium spot rates to ensure their shipments make it on time. Thus importers bringing goods from Asia to North America truly are playing the market. It really is the wild wild west on the trans-pacific.
When goods are not being shipped when expected and are continually pushed back it can be a major obstacle for North American importers. However those who are willing to pay the premiums are still able to get their goods on time, but at a cost.
According to Drewery Shipping Consultants Limited, the two-year spot freight rate trend for the World Container Index has been on a consistent increase since May where it hit a low of $1,200 per 40 ft container. As of early September 2018, it is now approaching $1,800. Comparing today’s rate with September of 2016 and 2017, where the rate was approximately $1,400, has increased by 25-30%.
Conversely, there is opportunity for exporters moving freight from North America to Asia. Now is your chance to secure more competitive rates. If you have the luxury, take advantage of this opportunity on outbound business to Asia.
As the trade war between the U.S. and China continues, the battle between supply and demand will endure the ebbs and flows of the market. As an importer with knowledge of the trade war you have to calculate what is more important for your shipment, money or time? Whatever your situation is, the experienced team at PCB Freight Management can assist you. Contact our air, ocean or ground freight experts to support your next shipment.
REQUEST A QUOTE
“Some scholars have argued that the invention of double-entry bookkeeping enabled the rise of capitalism and the nation-state. This new digital ledger of economic transactions can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, provenance of food, and anything else that can be expressed in code.” Don and Alex Tapscott, Blockchain Revolution
To determine whether blockchain technology can solve the original bill of lading problem introduced in part 1, it is helpful to understand what is an original bill of lading, and what is blockchain.
What is an Original Bill of Lading?
An original bill of lading is a negotiable document; a contract between a shipper and carrier.
An original bill of lading contains key data elements, including:
Generally, the original bill of lading does not contain the costs or freight prices associated with the contract between the parties. On the back of the original bill of lading are the general terms and conditions.
- Notify Party
- Vessel Name and Voyage Number
- Container Number
- Seal Number
- Cargo Description and Weight
- On Board Date
- Port of Loading
- Port of Discharge
- Final Delivery Place
- And the Terms of Freight Payment: Prepaid or Collect
What is Blockchain?
A blockchain is a decentralized distributed ledger (public or private) that contains transactions. It was developed in 2008 by a person or group of people known as Natoshi Sakamoto to support the exchange of Bitcoin. It is permanent, and most importantly, unhackable. Blockchain has been called the new network of trust. It allows peer to peer transactions without the need for a third party to verify the data. Blockchain can either be public where everyone has access to view the block, or private where only individuals with private ‘keys’ can access the block of data.
Once a block has been created, a decentralized computer network known as nodes will compute a unique hash. The hash is an alphanumeric record of the individual block. The hash of a previous block is referenced in the next block, thus creating the chain. If someone tried to change the hash, it will be detected in all previous blocks and be rejected, thus making a block permanent.
What is interesting is a block can contain the elements of a contract in digital form, known as a smart contract. The smart contract allows parties to conduct business based on negotiated terms into a time stamped digital format.
How Blockchain Smart Contracts Can Improve Freight Shipping
Tech companies have created platforms allowing users to create smart contracts within the blockchain. Blocks can be made private to ensure only parties with access to the block can access the data. Smart contracts require parties to first verify the date before a hash can be created. Imagine a time when the elements of the bill of lading are loaded into a smart contract, and the shipper, supplier, carrier, terminal, customs and others verify the data in the block before it is finalized. Once finalized and the hash is created, the data cannot be changed or hacked. By using a cryptocurrency, the consignee can ‘pay’ the shipper as the contractual elements are met and timestamped.
There would be no need for an original bill of lading, as the fully executed smart contract would act as trusted verification between the parties; a contract that cannot be copied, faxed or emailed and an original bill of lading without the need of a third party. That is the potential of blockchain and how blockchain technology can prevent potential shipping fraud.
If you need assistance with any of your freight forwarding please give us a call and our experienced freight forwarders can help you get your goods where they need to go.
REQUEST A QUOTE
A costly mistake; one that could have been avoided if policies were strictly followed. In ocean shipping, it was the most fundamental error that could be made - releasing a shipment without presenting the original bill of lading.
A Freight Relationship Built On Trust
It seemed innocent at the time. The import shipping clerk at this particular global container carrier had a good relationship with the Importer. The customer received at least one container of foodstuffs from the shipper every single week. He had been importing for over three years and his business was valuable to the carrier and their agent. The import shipping clerk knew the procedures well and had over 20 years experience in the business.
The terms of the freight were prepaid and the bills of lading were consigned ‘To Order’. At first the importer would present himself to the carrier’s office and surrender the original bill of lading to effect the freight release. In time, the importer and import customer service representative got to know each other and built a level of trust.
Give An Inch, Take A Mile
One day, the importer called the customer service representative and said that he could not arrive at the office to surrender the bill of lading that day. Instead he would fax (yes that long ago) the front and back of the bill to get the release, and subsequently be in the office the very next day to deliver the original bill of lading as required. The carrier acted in accordance and the importer was in the office the next day to deliver the bill of lading as promised.
This went on for months. The importer would call and fax the bill of lading to the carrier, get the freight released and deliver the original the next day. Then one day, it all went south.
Bad Habits Die Hard
The import clerk released the shipment against a fax copy of the bill of lading, but the importer failed to deliver the original bill of lading the next day, and the next and the day after that. Repeated calls to the importer went to voicemail. Emails were ignored. The freight was picked up and the empty container was delivered back. The cargo was gone.
At this point, the import clerk informed the Customer Service Manager. Shortly after, the shipper contacted the carrier with a claim for the full value of the shipment as they were still holding all three of the original bills which were issued at origin. The file moved quickly to the Vice President who became privy to the carrier’s errors and omissions insurance did not provide coverage specifically for ‘release of shipments without proper presentation of original bills of lading’. The carrier paid restitution to the shipper of $53,000 USD, the commercial value of the shipment.
The original bill of lading itself is a contract between the shipper and carrier. It is a contract of the receipt of goods, and under certain conditions confirms cargo is loading on board a particular vessel. If consigned to order, the original bill of lading is a negotiable document. The bearer of the original bill of lading is fully entitled to the goods. While use of the bill of lading can be traced back to medieval times, widespread use did not begin until the 16th century. Modern rules for shipping and bills of lading began in 1924 with the Hague Rules.
Can Current Technology Prevent Potential Fraud?
The technological breakthrough of the fax machine caused the fraud that led to the errant release of the goods. The fax machine allowed for the copying and sending of documents to a far too trusting import customer service representative. What you have to ask yourself is how vulnerable is the industry with today’s technology 20 years later? Can we use current technology as a solution to potential fraud? Find out in part 2.
REQUEST A QUOTE
An underrated aspect of freight management is the temperature of the goods from departure to arrival. Many people take for granted the amount of work and knowledge experienced freight managers have when transporting goods across the world.
Heat Wave Strikes Western Canada
This is evident with the heat wave striking a few of the major cities in Western Canada. Most specifically Calgary, Alberta, where a heat warning was issued on Friday August 10th, 2018. Temperatures are projected to hit 37C (99F). 37C would be a new record temperature for the city of Calgary, Alberta. The previous high was set at 36.1C in 1919 and again in 1933. Almost 100 years later a new maximum temperature could be reached by a city that hosted the Winter Games in 1988.
CN Rail Takes Preventative Action
With the record setting heat levels, CN Rail has taken preventative action to make sure the people and goods aboard their trains are kept safe and away from harm. This is done by implementing heat slows in Alberta and Saskatchewan, where trains are run at slower speeds in order to prevent the rails from buckling.
Buckling Train Tracks Can Be Hazardous
Buckling is when hot temperatures start to curve the steel rails making them hazardous to travel on. Heat will cause rails to expand, and when the rails expand they put a lot of pressure on the ties, ballasts and anchors that keep the rails attached to the ground. When rails buckle they turn from the straight sturdy rail you are accustomed to seeing, to a slithering snake that can be dangerous for a train to travel on, especially at high speeds.
By slowing trains down because of the intense heats, the trains will travel safer, and will also counteract buckling by placing less force on the rails. Less force on the rails will lead to safer operations for the people and goods travelling along the tracks.
Expect Delays With Extreme Temperatures
The downside to the heat slow will be the delay in people and goods arriving at their ports. CN Rail predicts this will cause delays of 24 hours to allow for the slower trains to travel safely along the overheating tracks.
If you need more information on the heat slows or any other freight related question, please contact a Freight Manager at PCB Freight Management for expert insights.
REQUEST A QUOTE
Ocean Carrier Conferences Encourage Industry Communication
There was a time when ocean carriers could collude on policy, capacity and, yes, even pricing. These conferences were exempt from antitrust laws. Participating carriers would meet regularly to discuss general rate increases, bunker surcharges, emergency surcharges, congestion, etc etc. Carrier conferences had a single purpose, keep the liner industry profitable with stable pricing and control of capacity. In practice, the effectiveness of the conference depended on trading conditions - supply and demand. Poor trading conditions forced carriers to take independent actions. Good trading conditions, of course, led to rate increases.
More importantly, conferences allowed carriers to have an open forum to discuss pricing intentions, something that is not available today. In fact, carriers currently have to signal their intentions in the market by indicating their intent. The most dramatic example of indicating their intent was during the Great Recession in 2009.
How Action Helped The Ocean Carrier Industry Rebound
According to the World Trade Organization, 2009 was the first year global GDP decreased since records were kept. It was also the year ocean carriers collectively lost over $20 billion.
Conferences were all but abolished by 2009 and carriers no longer had a form where they could discuss policy and capacity. By losing the opportunity to communicate at conferences, ocean carriers had to discover a way to continue communication to keep their industry profitable.
Maersk Line was first out of the gate announcing lay up of several ships in their fleet. Others followed. It took most of 2009, but eventually the supply/demand balance was reached. What happened next was unpredictable.
Carriers left ships parked around the world until they could get clear indication the economy had recovered. The result of laying up tonnage, was a collective profit in the industry in 2010 of $15 billion - a dramatic $35 billion swing from 2009 to 2010. By sending the initial signal in 2009, Maersk Line led the industry in removing capacity thus restoring rates and profits without the platform of the conference. Maersk sent a signal to the ocean carrier industry and everyone else followed.
Ocean Carriers Latest Signals
Fast forward to 2018. The container shipping industry has just come off a year of buyouts and consolidation. There are only three global alliances and a handful of carriers, yet the industry continues to struggle. Carriers are losing money, and the signals have already started.
In June of 2018, the 2M liner service operated by Maersk Line and MSC announced the removal of their TP1/Eagle service to the Pacific Northwest. Shortly after, THE Alliance comprised of Hapag Lloyd, Ocean Network Express and Yang Ming announced a merger of their two services - PS8 and PS3 - removing even more capacity from the Port of Vancouver.
Like in 2009, Maersk Line has taken the lead to send a signal to the market that current trading conditions are intolerable, and service capacity will need to be adjusted. In 2010, when global GDP roared back to life, shippers were begging carriers to take their freight, especially during peak season. If the current trend continues, we may indeed see a smaller scale repeat of 2010. For shippers, large or small, expect higher rates and less reliable service for the foreseeable future.
REQUEST A QUOTE
Warehouse Supply vs. Ecommerce Demand
The rise of ecommerce and the ever growing demand for products has shaped how goods are being treated from manufacturer to consumer. Less and less we rely on brick and mortar retail stores. Now there has been a shift to purchase your goods online and have them delivered straight to your doorstep. This has caused a change in how people are doing business and why we are moving towards a balanced equilibrium of warehouse supply and consumer demand.
Recently stories have surfaced about how the supply for U.S. warehouse space is decreasing. This is good news since warehouse supply has always been greater than consumer demand. In fact, 2018 marks the least amount of empty warehouse space since the year 2000.
Capitalizing On Warehouse Space
Anytime warehouse space is becoming available businesses are capitalizing on the opportunity to use their space. The problem some people are projecting is the demand for products is increasing at a faster rate than the amount of supply available. However, the good news is industrial warehouse space is simple to build, therefore too much demand will only lead to an influx in industrial production.
This change affects business owners the most because they have to decide whether to continue with traditional retail or move to a more modern online purchasing model where industrial warehouse space is at a premium. Business owners have to weigh the costs and benefits associated with both methods to see if one favors the other, or decide on a healthy balance between traditional brick and mortar as well as industrial warehouse space.
PCB Freight Management Can Assist You
When deciding on Freight services it is important to understand the flow of your goods from start to finish. Whether you need assistance shipping your products by air, ocean, highway or rail, PCB Freight Management has the experts who can organize your shipment and get your goods to their destination with care. Please contact us for all of your freight forwarding, warehousing and customs brokerage needs.
REQUEST A QUOTE