Flexible enforcement of VGM rule comes as a relief to supply chain

The International Maritime Organization's (IMO's) call for leniency in enforcement of the verified gross mass (VGM) rule after 1 July contradicts the carrier and terminal message of "no VGM, no load", but it brings much-needed relief to parties struggling to prepare for the regulation's implementation.

A lack of consistency in the interpretation by authorities around the world and conflicting positions surrounding the VGM rule have led to mounting concerns over delays in shipments expected as carriers, terminals, shippers, and their forwarders deal with teething problems in documenting, communicating, and sharing VGM information.

This appears to have prompted the IMO to urge a policy of 'practical and pragmatic' enforcement by agencies for three months after the 1 July regulation is imposed.

"On one hand these IMO remarks are not helpful to us in our enforcement approach towards customers where we put forward a strict 'no accurate VGM no load' policy" said Joerg Hoppe, DB Schenker director and head of ocean freight, for North and Central China.

However, they may lend a helping hand in allowing certain stakeholders involved in the SOLAS enforcement process to be lenient towards customers for a while. It is of nobody's interest to interrupt supply chains more than necessary.

Hoppe said the IMO's remarks did not come as much of a surprise. "It has faced relentless pressure from the shipping industry about the many ambiguities in the SOLAS regulations causing significant implementation hurdles."

Inna Kuznetsova, president of Inttra, emphasised that both the law and a carrier's decision not to load a container without the VGM have not changed. All export containers will still need to be accompanied by a VGM that is submitted to a carrier in time to plan the stowage.

"What the IMO suggests is for the countries applying penalties to consider a three-month grace period to offer shippers a small relief during the peak season while they tune up their process," she told IHS Fairplay.

"Let us remember that even with an honest effort to fully comply with the VGM, shippers face a need to update processes executed by thousands of their employees and contractors across many countries, so an error or omission may happen. De-risking this time by waived fines helps shippers to ensure a smooth execution."

TT Club's risk management director, Peregrine Storrs-Fox said the statement from the IMO was welcome. "Like many others in the industry, we have been disturbed by the apparent confusion over how shippers will comply with the amendment to SOLAS", he said.

"There are no doubt, still a number of grey areas. In order to give time for these to be resolved, the IMO's intent is that any party who has done its level best to comply, even if it has not technically fulfilled the letter of the law, may expect to be treated with understanding. Those, however who have done little or nothing can expect to be penalised."

Yet even with jurisdictions showing leniency in enforcement, Hoppe said the true test of the new rule and the systems in place would come when the first weight discrepancies occurred.

"Then carriers, terminals and authorities will hopefully deal with it in a pragmatic and fair manner until all the theoretical processes have been strengthened enough during the inevitable reality check on and after 1 July",  he said.

The Asia Pacific head of another German forwarder said he expected that in the beginning, a few 'unfortunate' boxes would be held back from loading and that it would take some time to work through the VGM issues.

"I think it will take longer than three months of such flexibility, particularly as we all know the legal framework is still largely uncompleted and weighting facilities are also still not available everywhere", he said. "I expect that the commercial flexibility will last quite a while as lines cannot afford to leave containers behind and lose customers because of a rigid implementation."

Also gaining momentum are terminals offering container weighing services. Global terminal operators HPH, DP World, and APM Terminals have announced that they will weigh boxes across their global portfolios, although in China, only Hutchison Port Holdings's Yantian International Container Terminals, and now Modern Terminals' Dachan Bay and Taicang facilities, have announced that they will offer a weighing service.

There is still no indication from China's two top container terminal operators - China Merchants Holdings (International) and Cosco Pacific - about whether they will give shippers the option of weighing their containers.

Article by Greg Knowler, Senior Editor, IHS Maritime Portal - Fairplay

http://fairplay.ihs.com/