Are you Ready for VGM Implementation?

By now most if not all international shippers should have some familiarity with the International Maritime Organization (IMO) Safety of Life at Sea (SOLAS) ruling concerning the verified gross mass (VGM) amendment going into effect July 1, 2016.

Since January 2015, in an effort to make shippers aware of this very important amendment J.W. Allen & Company has periodically sent out newsletters with status updates. For those not yet familiar with the VGM amendment at it’s core it instructs the shipper of each international shipment they must affirm and declare in writing the gross weight of each shipment is reported correctly and has been determined by one of two accepted methods. These are Method #1 where the empty and loaded container has been weighed as a single package, and Method #2 where the shipper has individually weighed each packaging unit prior to container loading and added the total cargo weight to the stenciled tare (empty) weight of the container. In any case weighing must be done on a verifiable certified scale meeting current national or state standards. While shippers may authorize a third party to report the certified VGM to the ocean carriers they retain ultimate responsibility for meeting the rules requirements.

For your consideration under Method #1, in order to weigh both empty and loaded containers truckers would be required to alter their routing from the port to the cargo loading location and back again resulting in additional fees per mile out of route, and for potential wait times at the scales, etc. per that trucker’s tariff.

There is no exception to meeting this requirement for less than container load (LCL) shipments. Shippers still hold the responsibility to verify each packaging unit’s gross weight; i.e.: the cargo, the pallet/ skid/ crate/ etc., shrink wrap, labeling, documentation, everything that is part and parcel of each packaging unit as it ships.

So what’s the anticipated cost of non-compliance? Several consolidators have advertised LCL cargo arriving their CFS without certified VGM data will be assessed a $5.00 w/m (1000kgs/ 1 cbm) scaling fee, $25.00 minimum, and an additional $10.00 admin fee. Other consolidators may have different rate basis for scaling but the above would most likely be standard or at least standard adjacent.

In order for port authorities and ocean carriers to meet their obligations under this amendment the policy of “No VGM declaration/ No load” will be implemented. This means should the shipper not provide certified VGM information by the specified deadline the cargo will not be loaded onto the ocean vessel and additional charges for re-handling of non-compliant shipments will be applied for the account of the shipper by the port facility, ocean carrier, inland carriers, freight forwarders, etc. In some instances, depending on the port of loading, loaded containers without proper VGM declarations on file, will not be allowed into the port at all.

While some ports have declared they will not accept loaded containers into the port without the VGM being filed in advance, a few US ports have announced they’re offering scaling of loaded containers when in-gated, and others are reassessing their options on the subject. Shippers should very carefully consider port weighing being a viable option as it will not be uniformly available, in some markets not at all, and of course there will be a charge involved. For example, one port authority is advertising a rate of $300.00 per container.

Need food for thought of why relying on the ports to scale could be a risk? One port authority recently performed a calculation based on their availability of one certified scale, their 24-hour ability to load 15,000 containers onto multiple vessels, and it taking a bare 60 seconds to properly position, scale, and remove a container. The result… it would require 250 hours to complete the task of weighing all 15,000 containers. Almost 10.5 days, and that’s assuming the scale would never be out of service which those of us who have ever been involved with scales, certified or not, know is not probable. Even if a port had ten certified scales it would still take more than a day to accomplish, again assuming all ten would be in service full time.

The point? An exclamation point would be placed on the booking term “Estimated Time of Sailing” (ETS), not to mention ETA’s, and the fact some containers would not make their initial advertised booking schedule because they had not yet had the VGM certified. Given ports are not planning on extending the period where they first accept possession of a loaded container, the so called earliest return date, and the port cut off, this presents a very real threat to supply chain schedules and the shippers ability to meet the consignee’s delivery requirements. Of course not every shipper will rely on the port to verify the VGM so the picture may not be as bleak as it appears yet this scenario is nonetheless still a valid consideration.

Although there is no universal standard on penalties for non-compliant VGM shipments, some ocean carriers are suggesting their fees alone would be based on 75% of the combined freight rate, bunker, and currency adjustment factors. Repeating an earlier statement as a reminder; on top of these ocean carrier re-handling charges similar fees would be assessed by the port authority, truckers, freight forwarders, etc. Combined a significant figure indeed to pay for non-compliance.

New research recently conducted by a leading industry publication has found three in four shippers, forwarders, NVOCC’s, port authorities, and ocean carriers feel the upcoming weight regulations will have a profound affect on their supply chains. Frankly this is most likely a true statement and something that may be experienced to varying degrees depending on an individual shipper’s ability and/ or readiness to comply with the VGM rule.

Yet, to be succinct and honest with ourselves, a part of the impact on the supply chain can be assigned to peoples dislike of change, or fear of the unknown if you prefer. In no way is the suggestion being made that this amendment is no big deal, to the contrary it is a very big deal. It is yet another in a long line of changes with which shippers and supporting networks have had to adapt, and like so many others before it, VGM is not going away. It is a reality, it is happening, it is here to stay.

Functionally the VGM amendment is not asking for anything US shippers have not been required to provide in the past; accurate and true cargo weights. Administratively however, there are significant changes to past practice; now weights will have to be certified and the method of that certification declared and confirmed by signature of an authorized shipper’s representative.

The IMO has announced the need for a three-month grace period to be allowed on enforcement of the amendment but reinforced the effective date of the VGM rule remains July 1, 2016. However, despite the call of a grace period as the VGM amendment is a safety issue, the IMO is leaving it up to individual ocean carriers whether to fully employ the amendment on July 1^st, or honor the grace period.

If not already in the works shippers should take full advantage of the available time remaining before implementation and the subsequent grace period to aggressively develop and put into practice processes and procedures to satisfy the VGM rule and not hope and pray it’ll be going away. Investment in doing the former will ensure your company is ready and able to meet compliance ensuring your cargo does not get delayed, or worse refused at the port of loading. To do the latter will only guarantee your cargo will not be accepted for vessel loading or at some ports not even allowed through the port gates.

Keep in mind the VGM amendment is an international rule. Shippers in countries all over the world are asking themselves the same questions, facing the same challenges, experiencing the same dislike of change, and the same deadline as you are.

Let your forwarder offer guidance, use them as a resource to explain the amendments purpose, why it’s so important to comply with the mandate, and answer your questions. Time is short but a lot can be done if you take action now and not delay another day.

Bill Yennie
Vice President, Exports