Liner shipping alliances were created years ago when there wasn’t enough containerized cargo for many competing ocean container carriers (sometimes called liners). They have evolved through time, a bit, but still allow several ocean carriers to band together to serve a particular route.
For instance, from Shanghai to LA and return, an alliance might provide weekly service. The companies then rotate in providing that ship for the service. If you book with one of thecompanies, you don’t know whose ship will be carrying the cargo, but it will be one of the members of the alliance. If everything goes smoothly and there are no delays, it should notmatter to the shipper whose ship they are on.
Alliances go by clever names such as THE Alliance (Hapag-Lloyd, ONE, & Yang Ming). Here’s a summary of facts about alliances, including who’s in each.
But when disruptions occur, as now, and ships don’t sail on schedule either because they are postponed by the line, or because of congestion in either the loading port or the unloading port, it becomes a problem.
The article outlines some of the complaints. Alliances have to be authorized by the specific counbtry they dock in. There is actually a bill in the US Congress to suggest that the FMC (Federal Maritime Commission) be given stronger powers to investigate problems and push the alliances to provide fair service to all customers.
Here is an excellent example of customer segmentation.
In the last year or so there have been several ship explosions and fires causing ships to be laid up and cargo to be delayed or lost. Chemicals are probably the most important reason for ship fires which start in the cargo. What better way to reduce the risk than refusing the cargo.
There are two additional things you should know to understand this situation properly.
First, you might think insurance covers such accidents. It does not entirely, and it leads to endeless haggling and lawsuits. And accidents on ships can be declared ‘general average’ by the shipowner. That means that every cargo shipper must pay their share of the accident cost. The General Average clause goes back to the days of sailing ship voyages, which often were funded by an investor, or a group of investors. Often the captain had a share of the investment. The captain was in full charge of the business side during the voyage, choosing cargo and managing the voyage, hopefully safely. If the voyage succeeded, profits were lagrge for the investors. many New England fortunes were made that way. If the ship had a problem, general average meant all the cargo owners had to pay the costs. that meant the investors were on the hook, since they usually had shares in the cargo. Insurance coverage for cargo was limited.
On today’s container ships, the situation is quite different. The cargo is owned by the shippers, not investors. Ships are separate companies, so if a ship is lost the actual owners are shielded from the loss by simply declaring the ship bankrupt. And most cargo is covered by insurance, usually individual insurance policies. ships themselves have some liability insurance. When general average is declared, all the container cargo owners have to pay their share of the losses. You can see how huge fights can develop over who pays how much. Also, if some containers are not damaged, the cargo owners cannot pick up their cargo until they have paid the general average share of the loss. So accidents at sea are a general nightmare for all concerned.
Second, cargo in containers is fairly often mislabeled. The bill of lading does not contain correct information aboutwhat is in the container, eg. chemicals or lithium batteries. That’s done to get a lower rate, and/or to avoid customs duties. Or it’s just a mistake. So dangerous chemicals can be in containers unknown to the ship. When the cargo shifts or some container is damaged, a fire starts, and the ship has a real problem. It may not be able to continue the trip, or it may succeed in putting outthe fire, but some of the cargo is damaged, whether by burning or by smoke or fumes, or the fire retardant. Losses!
So you can see why when a ship is already easy to fill with benign cargo, a carrier might not want to accept chemicals. But as a common carrier (in the US) a ship must accept any cargo offered. Plenty of demand lets carriers cherry pick what they want to carry.
Supply Chain and Logistics 