On July 1, 2016, the Safety of Life at Sea (“SOLAS”) requirement for shippers to provide steamship lines with the verified gross mass (“VGM”) of each shipment takes effect internationally.
While under development at the International Maritime Organization for years, these requirements caught many in the U.S. by surprise last summer when the deadline was emphasized. Perhaps equally surprising was the response of the U.S. Coast Guard, the agency with enforcement jurisdiction. Coast Guard management has been publicly quoted as saying the SOLAS VGM requirements are not mandatory under U.S. law! Rather, they are simply one business means to achieve compliance. U.S. terminals have been weighing export containers for OSHA compliance reasons for years, but the same is not true in other countries.
What does this all mean for U.S. companies? Let’s start with this is an issue for exporters more than importers. Importers are typically on the receiving end of shipments, so unless a company has worldwide operations, the exporter-supplier has the burden to comply. Of course, importers would be wise to communicate with their suppliers to learn how they intend to meet these requirements, as importers wants their goods received on time. Beyond that, there really isn’t much an importer can do. For exporters, however, it is a very different story.
Let’s start with, what does the VGM process require? Every container delivered to a steamship line for stowage on a vessel must be preceded by its VGM. The VGM itself must state the actual gross weight, meaning the weight of the packed container, not just the goods inside. The shipper may either weigh the packed container, or weigh the cargo, any other shipment related materials in the container (such as pallets, lashing, etc.), take that number and add it to the tare weight of the container. The actual weighing must be performed by use of a calibrated, certified method approved by the government. With number in hand, the shipper submits the VGM to the steamship line.
There are several key questions that jump out. For example,
1) How do I find the tare weight of my container? The steamship lines have generally advised they will publish container tare weights and post them on their web portals. While container sizes have generally been standardized, their weights have not.
2) What is a calibrated, certified method approved by the government? In the U.S., this will typically mean the agency at the state or local level that administers weight and measure regulations. Examples of weighing equipment include scales, weighbridges, lifting equipment and any other devise capable of determining weight. One challenge is that outside of port areas, there is often a lack of calibrated, certified scales of sufficient size. What is the situation in other countries? How reliable are the weight and measure authorities or the weighing equipment in other countries?
3) How do I submit this information to the steamship line? The preference is for electronic transmission, so carriers are expected to update their electronic interfaces to allow electronic submission. The need to invest in IT upgrades, however, caught the carriers somewhat flat-footed.
4) May I submit my VGM to the terminal? The SOLAS VGM requirements mandate delivery of the data to the carrier with the carrier giving notice to the terminal operator. Watch for how the individual carriers announce their procedures. For meeting cut-off deadlines, also keep in mind where the carrier’s customer service operation is located and what the time difference is between there and the port of lading.
5) What does signing the VGM mean? One of the areas that makes exporters really uncomfortable is the idea an employee needs to sign or put his or her name on the VGM submission. What are the legal consequences?
Who Must Comply?
Wait, I’m the shipper and I’m responsible? Why can’t I rely on my forwarder? The VGM burden is squarely placed on the shipper to comply so, without question, if you are shipping container loads of goods, best practice demands you include getting the load weighed. Of course, there is always the option to let the steamship line do it, where they agree to do so, but at what cost?
With rare exception, the steamship lines in the U.S. have said a container delivered without a VGM will be turned away. The exception generally comes in those locations where the port authority has said it will weigh containers, and some have said they will do so free of charge. If you are not lucky enough to ship through one of those ports, get prepared. Either you will rely on your trucker to get you the weight or you will arrange the weighing yourself, and then report it.
There are a handful of exceptions. One deals with ro-ro (roll-on/roll-off) ships with short international voyages where the containers are carried on chassis or trailers and loaded and unloaded by being driven on and off the ships. Similarly, if the manufacturer states the gross weight on the goods inside its initial packaging, such as televisions sets in their boxes, that weight may be relied upon. Otherwise, a weighing process must be integrated somewhere into your exporting process.
Who Must Sign?
It is also critical to keep in mind the VGM requirement calls for the signature of an authorized representative of the shipper. So, while you may be able to facilitate the weighing process through coordination between your trucker and your forwarder, the trucker is certainly not going to sign on your behalf. While admittedly the VGM requirements state the certificate may be “signed by a person duly authorized by the shipper,” in reality, any third party who signs for the shipper would be foolish to do so without written documentation in hand as to the actual weight. Put another way, if you are able to convince your forwarder or any other third party to sign for you, and he would do so as attorney-in-fact, expect to pay for that service. Also, look for third parties to spring up and offer the combined service of weighing loaded containers and providing the VGM to the carrier. Who will they be? How reliable will they be? At what cost?
How does all of this apply to less-than-container load (“LCL”) shipments? With an LCL shipment, several shippers have goods in the same container. In these cases, the freight forwarder will have to make a business decision. [To be clear, here we refer to the forwarder as the party who issues a house bill of lading, i.e. an nvocc. If he is a traditional forwarder, he does not have a tariff-filing requirement.] Clearly, as the shipper on the master bill of lading, the freight forwarder stands in the same shoes as any other shipper. He must provide a VGM to the steamship line. As such, shippers who rely on freight forwarders to consolidate their goods should expect they will be required to provide the VGM to the forwarder. However, forwarders may, for business and liability avoidance reasons, decide to weigh every consolidated container. That sounds simpler than it may be to implement. The actual weighing of the container is relatively straight forward – load it onto the truck, have the loaded truck weighed, deduct the weight of the truck and trailer, and the resulting figure is the VGM. There is one looming question remaining – how does the forwarder charge for this service? Is it included in his tariff on file with the Federal Maritime Commission? If not, how quickly can he get it added? Knowing this was coming, why hasn’t the forwarder already updated his tariff? Unless the charge is properly added to his tariff, the forwarder is not permitted to charge for this service. Even if that is not a hurdle, the forwarder still must decide are the related costs prorated by the comparative weights or perhaps values declared by the shipper? Should a flat fee be assessed per shipment?
Next, when is the VGM due? We are still about a month from the deadline, so the precise answer remains pending from many carriers. One thing is clear. The VGM is going to be due prior to receipt of cargo at the terminal and before a particular voyage is closed. The often given example is if receiving stops at 5:00 p.m., expect the VGM to be due by noon. Watch for your carriers to announce their plans.
What exporters should consider doing right away is communicate with their freight forwarder and steamship line partners. What is each planning? These entities and your truckers are key to making the VGM process work as smoothly as possible.
In the meantime, exporters and forwarders alike need to think about what other changes does the VGM process demand? For example, how will your record keeping change to include VGM documentation? Does your insurance coverage need to be reviewed/updated? The VGM process allows the steamship line to rely on the VGM. No separate validation is mandated. What happens if there is a mistake made, the wrong number inadvertently reported, and general average results because a container shifts and causes serious damage to the ship or other cargo is damaged en route? What are the consequences to the exporter? To the certifying employee?
The steamship lines pushed for the VGM. Now that it is upon us, the carriers have come to realize what we all know. The supply chain is complicated and there is no such thing as a “simple” change to it. To give the parties more time, the IMO issued a circular on May 23, 2016 urging member-states to employ a “practical and pragmatic approach” when verifying compliance during the initial three (3) months of implementation. Time is short. Are you ready? If not, what are you doing to get ready?