This pandemic has brought for the world a new normal that we’ll follow reverently in the future. Thanks to COVID-19, social distancing and industrial automation are rapidly developing in the global economy. But the world has also suffered substantial financial loss due to this pandemic.
Hampering the growth of the world economy, COVID-19 has also affected the shipping industry directly and indirectly. As people need to avoid human contact, the policy of social distancing has obstructed multiple industrial operations. Financial distress in the international trade market has lessened the demand for commodities and raw materials. Shipment companies witnessed bitter competition that resulted in lower freight rates and monetary loss for their business.
As Trans-Pacific Maritime Conference 2020 got canceled, scales seem to be tipping against shippers. Port authorities want foreign ships to be put in quarantine to decrease the threat of coronavirus infections. It leads to more penalties and the heightened risk of transportation delays. There were reports of vessels leaving Chinese ports packed with only 10% of their actual transportation capacity. The shipping industry doesn’t seem to spring back to its original productivity level before 2021. Let’s see what some significant challenges are that shippers have to face during COVID-19:
Due to COVID-19, shipping companies have to follow specific procedures to ensure their crew’s safety. It’s necessary to organize proper sanitization and disinfection strategies to diminish the risk of infection. But these safety precautions often result in unexpected delays which make companies liable to penalties. Some of the legal penalties are:
Demurrage: This penalty relates to the time a container is inside the terminal. Truckers have to transport it out of the depot and then return with it being empty. Authorities charge shipping companies an extended amount of money when the container gets overused.
Detention: When unloading takes more time, truckers have to pay a fee on an hourly rate. Due to COVID-19, it’s probable for shipping companies not to be able to return the container during the allocated time frame. It refers to the time spent outside the port.
Per Diem: International shipping companies pay the rental fee to use the shipping line’s equipment. It refers to the time containers leave the terminal to when they get returned. For each free day that these pieces of equipment do not reach, shipping companies have to pay a per-day penalty. People sometimes confuse Per Diem with the above two claims, which get perplexing.
2. VARIANCE IN CUSTOMS REGULATIONS
Customs regulations change with the country and aren’t the same for every region on earth. However, customs brokerage often assists the shipping industry in fulfilling the customs requirements. Brokers know the state’s rules and regulations concerning imports and exports. The stress of dealing with customs officials has never been complimentary. This pandemic has made countries introduce new guidelines and set strict procedures to fight COVID-19.
Customs brokers can understand these never-heard-of-before regulations. They negotiate with government agencies to ensure a smooth freight operation in any foreign country. For example, China introduced anti-Zika treatment regulations for US exports from Florida. That’s something people were unfamiliar with before. Brokers alleviate transactions between the authorities and the shipping company’s management. They guarantee that no mistrust takes place during the unloading of goods and transportation to facilities.
Such mistrust leads to severe complications in 2020 because of how much people are afraid of coronavirus. And shippers don’t want to have beef with the customs officials. For example, Saudi Arabia is notorious for its customs regulations. There are countries where the lack of proper documentation can lead to delays and monetary setbacks. After COVID-19, non-compliance with the tiniest stricture can lead to complex problems for the shipping companies.
3. ABSENT LABOR
COVID-19 has enhanced a sense of apprehension among the workers of the shipping industry. The workforce in every industry is concerned about health regulations at their workplace. If human resources don’t receive due benefits they’re expecting, it becomes a nuisance for the company. Sometimes, the management performs a poor job handling even the reasonable demands of the laborers. That can cause workers to go on a strike and cease their labor activities.
Such unexpected obstructions can lead to delays in transportation and result in the charges mentioned above. Workers have to do the necessary jobs of loading/unloading and transportation of goods to storage facilities; thus, shipping companies need to be rational about the dangers posed by COVID-19. If workers can work in virus-proof conditions, it enhances their motivation and increases their productivity.
4. DAMAGES IN STORAGE
These unparalleled consequences of COVID-19 have made industries fight for the survival of their business. Much can happen during the journey from the warehouse to the customs office. It includes lost papers, missing cargo, and damage to the products. Commodities stored in a temporary storage facility aren’t unlikely to receive physical issues. Interim storage is cost-effective, but its durability and reliability are dubious. It’s safer to pick an external storage unit. They offer better security services to your valuable goods that are yet to get transported locally.
But COVID-19 brings many more impediments to the success of the shipping industry. The probability of missing containers at the port is higher than you might’ve thought. If Malaysia Airlines can lose Flight 370, anything can happen! When port workers unload heavy containers, they can lose a few. Searching for a specific one in a pile can be a difficult job, and the need for social distancing motivates us to adopt technologically-advanced standards in the shipping industry.
5. PORT CLOSURES
Unexpected and unanticipated closures of ports bring immense sufferings for the shipping industry. Shippers have to encounter threats of being quarantined for 14 days to mitigate the risk of infections. Average Brazilian consumers wait 40 days to get their internationally-purchased packages. COVID-19 brings more complications for already-delayed product-delivery to the customers and reduces people’s trust with the shipping companies. Some guidelines have been issued for the freight industry to manage their business during this pandemic. Shippers should study these instructions to avoid any hindrance to the transportation of commodities.
The shipping companies can control the spread of coronavirus by implementing suitable health measures. But there are some problems they have to face while keeping their business ship afloat.
Only 5% of the containers shipped to the US ports get physically inspected. This dangerously-careless policy has become a significant headache for the global goods transportation business. We can observe some valuable lessons that we’ve learned from COVID-19. We need to resolve our disputes with dialogues and negotiations. Shipping contracts should include clauses addressing disruptions caused by current health issues. We need to adapt constantly to speedily-changing regulations. These measures can help the shipping companies deal with coronavirus-related complications in 2020.