Author Archives: just2bruce

New shipping regulation to combat global warming is under fire

Posted on January 16, 2023 | 1 comment

The International Maritime Organization (IMO) has issued their rules for the Carbon Intensity Indicator (CII), which is intended to combat global warming by reducing carbon emissions. It’s been years in the making.

But some of those affected by the regulation think there are flaws in the index which can produce some unintended consequences.

We know that many ships are chartered– they are operated by firms or people who are not their owners. Charter contracts determine how the ship will be operated and how the ship owner will be paid for allowing the use of his ship. But the contracts may allow the charterer to operate the ship in a way that reduces the CII score and causes the ship to fall into a lower class. Perhaps the ship falls into Class E which says the ship should be withdrawn from commerce– sentenced to the shipbreaker.

The Baltic and International Maritime Council (BIMCO), a non-governmental group that offers clauses for contracts addressing numerous international shipping issues, has prepared a contract clause for chartering contracts. This is a useful starting point, because BIMCO contracts and clauses are often used as a starting point for making a charter contract. Use of the BIMCO contracts or clauses is totally voluntary.

The article below explains some of the issues that can arise between charterers and owners, with equations to boot. The essence of the problem is that the index is based on ship capacity, not cargo carried. So sailing empty miles improves your score on the index two ways– first because sailing light burns less fuel, and second because the miles add to the denominator of the measure, reducing it. The examples given show the effect.

Many feel the index should be based on carrying cargo. And some believe the BIMCO clause will not be workable in contracts, and will not use it. But the problem remains of how to divide responsibility between ship owner and charterer for managing the CII score.

I tend to believe any rule is better than nothing. And I think charterers and shipowners will work out how to manage the contract problem. As for empty sailing or sitting in port, I don’t think anyone wants to sail without a paying cargo, or suffer delays even to improve the index. So everyone, owners and charterers, will continue to fill their ships when they can, and sail shorter routes when they can, simply because it’s expensive to operate the ship you’ve chartered; you have to earn a profit at it.

For all the complaining, the CII is still a good thing. We will have to see if it can be tweaked to everyone’s satisfaction.

Greg Miller·Wednesday, December 21, 2022

New shipping regulation to combat global warming is under fire

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Posted in Logistics, Shipping, Sustainability

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FMC ruling could be crucial in other ‘unfair D&D fee’ complaints

Posted on January 14, 2023 | Leave a comment

Shipper complaints about demurrage and detention (D&D) charges by carriers have been many, especially over the Coronavirus period, when many facilities were congested and supply lines were overloaded. One of the main complaints was the uncooperative attitude of port terminals and yards when asked to release cargo.

The Federal Maritime Commission (FMC) held a hearing over one case involving Evergreen, a major container carrier, and trucker TCW Inc, in December. Evergreen was forbidden to make per diem charges on days when the motor carrier could not pick up the cargo.

The essence of the FMC argument is that you can’t charge D&D when it’s impossible to pick up the container. Frequently ports and yards may have reasons to deny a trucker from picking up, but if it doesn’t lead to congestion and is the yard or terminal problem, the carrier can’t charge D&D.

The latest case involves carrier Hapag-Lloyd and rail line CSX, versus a Wisconsin forwarder, ME Dey, and the trucker New Age Logistics. Hapag-Lloyd has already waived over $150,000 in charges, and the case is still ongoing. CSX rail may well cave in also.

The principle established by the FMC is important, and may prevent some D&D charging errors in freight bills. Carriers are going to need to be careful and monitor conditions at the facilities holding the containers.

This may go some way toward increasing communication among logistics ‘partners’. Now a carrier must keep informed about the conditions at the yard where the container is located. They will need to ask for information on a continuous basis, which they have a right to, because it is affecting their billing process. If the yard is closed for a holiday, or has the container under a big stack that cannot be moved fast, they will need to tell the carrier, so that the billing can be waived. This information exchange is a crucial part of the financial wing of the supply chain.

When there’s money involved, action often follows.

I think it’s great for the FMC to proactively insist on attention to the possibility of congestion. It will encourage yards to reduce it, and carriers to monitor it, and shippers to work to avoid it.

By Nick Savvides 03/01/2023

FMC ruling could be crucial in other ‘unfair D&D fee’ complaints – The Loadstar

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Posted in Logistics, Shipping, Supply Chains

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Biden climate blueprint promotes modal shift away from trucks

Posted on January 13, 2023 | 1 comment

Building on the idea that maritime and rail generate less carbon than trucks, the blueprint for decarbonization suggests shifting transport to those means.

That’s easier said than done. The EU has been working hard for some years on a modal shift to river and rail transport for cargo inside Europe. They have actually had some success— a few percent improvement.

But the geography of the EU is a lot more conducive to waterborne transport of cargoes. There there are quite a few navigable rivers going inland from the coast where the ports are. Many EU ports have set up ‘inland ports’, large distribution areas inland that often can be reached by barge, to offload container cargoes and get them ready for distribution. This foresighted policy offers many advantages, both from an ESG standpoint, and for reducing congestion at the ocean ports. But the US has only one large river, the Mississippi, navigable for a long distance into the heartland, in a land mass much larger. Smaller rivers on the East Coast don’t go as far.

However, particularly on the Mississippi, there is a lot of potential for more barge traffic. I also suspect that maritime transport could be used along the coasts for some kinds of moves, particularly movements of products like refinery outputs, that might travel by truck otherwise.

So there is rail. The EU has a problem with rail; most rail is state-owned, and is oriented around passenger travel, not freight. And rail lines in Europe are not all compatible; not only are their practices disparate, but the physical equipment isn’t even compatible at some borders. That adds transfer delays as well as simple handling delays to transport. The EU will have a much harder and more costly time increasing rail cargo percentages.

In the US, we have seven Class I rail firms, all private, that crisscross the country and offer cargo service. Rail can provide the backbone of distribution from ports to the hinterland. But will it? Rail firms are all private, not public; they are currently focused on their most profitable segments, and have engaged in rampant cost-cutting. Sometimes, it’s referred to as PSR (precision scheduled railroading), but quite often it is more closely allied with old-fashioned cuts driven by short-term accounting. The recent reductions in staffing are claimed to result from PSR, but in fact, simply serve to reduce operating costs and improve operating ratios. They may result in reduced safety, as some of the claims in front of the STB put forward. And the popular step of running really long trains to save labor costs reduces flexibility and adjustability of rail traffic to support less predictable loads. These moves by private firms greatly increase the complexity of carrying out the proposed modal shift in the US.

But certainly a modal shift will reduce carbon output. And there is actually a lot that a government push could accomplish. Some of these things are:

  • Infrastructure improvements for inland maritime operations;
  • Streamlining projects for on-dock rail at ports large and small;
  • Inducing rail lines to improve their rail yards and lines to support a more flexible cargo mix and customer set;
  • Driving rail common carrier rules that will induce or force rail lines to accommodate cargoes from a broader set of customers, even though the traffic will not be as profitable as long steady coal or grain trains.
  • Keeping pressure on the rail lines to serve a broad base of customers, particularly intermodal (container on flat car or trailer on flat car). A move to transport this type of cargo long distances to inland container terminals would help with emissions and get trucks off the major interstates.
  • Supporting inland terminals and distribution points that are rail connected.

There are probably more, and Pete Buttigieg and the President’s commission on supply chain probably are thinking of them.

The biggest problem is how to get private industry and investors on board to finance and support the projects.

US National Blueprint for Decarbonization

John Gallagher·Tuesday, January 10, 2023

Biden climate blueprint promotes modal shift away from trucks – FreightWaves

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Posted in Logistics, Strategy, Supply Chains

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