As US retailers cancel purchase orders at Asian factories due to plunging demand for a variety of consumer goods, ocean carriers and terminal operators report a troublesome increase in booking cancellations and container no-shows at overseas ports.
Canceling bookings, and the failure of beneficial cargo owners (BCOs) to notify carriers that they will not fulfill a booking order, prevent carriers from optimizing vessel capacity and can result in other shippers from being unnecessarily shut out of voyages.
"No-shows for bookings are as high as 20 percent," said Peter Levesque, president of Ports America. US retailers have canceled a large number of purchase orders, which is a main driver of the no-shows, Levesque told the JOC Uncharted webcast this week.
Juergen Pump, president North America at Hamburg Sud, told the virtual Agriculture Transportation Coalition (AgTC) conference last week it is important that all members of the international supply chain keep the lines of communication open.
“Information flow is critical. We have to keep our customers informed when operational issues will occur because of blank sailings,” Pump told ag exporters. “My ask of you is to tell us when you have to cancel your bookings.”
A normal level of booking cancellations in the trans-Pacific is about 15 percent, Pump said. Cancellations reached 40 percent in the last week of April and 29 percent in Week 20 in mid-May, he said.
In the vast majority of cases, the BCO is not penalized for a no-show. Likewise, carriers are not penalized if they accept a booking but then have to roll a shipment because of insufficient capacity. A small number of contracts, such as those in which bookings are made via the NYSHEX exchange, include non-performance clauses with penalties.
Disruptions across supply chain
Booking cancellations are yet another supply chain disruption that has flared up as a result of the demand destruction wrought by the coronavirus disease 2019 (COVID-19).
Carriers since April have announced more than 120 blanked sailings into July. As import volumes plunge, terminal operators at US ports are canceling work shifts, sometimes without giving enough advance notice to adjust their pickup schedules, truckers say. A knock-on effect of the blanked sailings is that detention and demurrage charges are on the rise for exceeding free storage time and for the late return of equipment to marine terminals.
The supply chain disruptions have caused warehouses in overseas ports to fill up due to retail store closures amid the COVID-19 lockdowns in the US, while shipments of non-essential merchandise sit idle in US warehouses. Empty containers have backed up at US ports because the blanked sailings have reduced vessel capacity for the return of empties to Asia.
Shippers peg blame on blank sailings
Ag shippers said the blank sailings are the root cause of their supply chain problems because shippers are unable to plan their export schedules with any sense of certainty.
“Our challenge is getting bookings,” said Rachal DeRosier, global logistics specialist at Johnsonville. She said the sausage manufacturer has developed a number of contingency plans to keep products flowing, such as moving shipments by long-haul truck to the West Coast rather than rail, or shipping some containers to the East Coast for Asian routings.
As a result of the blank sailings, some shippers have no other option but to book each container with more than one carrier in order to ensure the shipment is not rolled at the ports, said Bob Sinner, president of SB&B Foods, an ag shipper in North Dakota. “The past four months have been nothing short of awful in the upper Midwest. We have no other option but to overbook,” Sinner said.
Jeremy Nixon, CEO of Ocean Network Express, told the AgTC conference blank sailings have peaked and BCOs will see fewer scheduled sailings being canceled going forward. “We’re trying to end these ad hoc cancellations,” he said.