TT Talk - Weight: health check
When the requirement for verified gross mass (VGM) was adopted by the International Maritime Organization (IMO) in November 2014, preparations should have started through the containerised supply chain to reach compliance. Now less than two months to enforcement, what final steps need to be in place?
Everyone involved in the containerised supply chain should have been engaged in taking some very practical steps in order to comply with the revised requirements under SOLAS to obtain, communicate and use VGM information.
Fundamentally, this falls on the shipper to determine by which method the consignment will be weighed, using equipment that satisfies the national rules for calibration and certification, in order to obtain VGM and then it communicate formally (through some kind of signed shipping document) to the carrier and the terminal operator. However, every counterparty is impacted.
Step 1: Communication
Where the transport documentation is handled electronically, there are new and revised agreed message standards to accommodate the need to identify VGM, which is totally distinct from mass used for other trade purposes. However, each entity needs to adopt the new standards and modify its own IT infrastructure – as well as ensure that all counterparties will understand the messages in the same fashion. Of course, not all business is transacted electronically – perhaps a significant opportunity has arisen to enhance processes.
“VGM is totally distinct from mass used for other trade purposes”
Carriers and terminals will need to implement processes to ensure that VGM is available at the right time – and maintain the go/no go enforcement. Many terminals have stated publicly what in-gate processes will be adopted, which is helpful for the landside supply chain.
Step 2: Due diligence & contracts
There should be careful focus on contracting and due diligence, particularly for the shipper community. The term ‘shipper’ in relation to the ocean carrier’s bill of lading (as stipulated in the IMO guidance document encompasses a broad range of stakeholders, including traders, manufacturers and freight forwarders. The complexity of the supply chain means that there will be many instances where the contractual shipper has no direct oversight over the weighing process and potentially little opportunity to ensure that it is compliant.
Most bills of lading – both ocean carrier and NVOC – contain what would be viewed as standard clauses, such as the shipper (‘merchant’) obligations to provide accurate information and indemnity for anything that arises due to a failure of those obligations. However, that contract of carriage will be between the carrier and the shipper; it will not govern the relationship maintained with a 3rd party warehouse or service provider.
“The contract of carriage will not govern the relationship maintained with a 3rd party warehouse or service provider”
There may be a variety of ways that cargo is received, particularly in relation to consolidation shipments. In each case – whether the gross mass information is being provided by the party tendering the cargo (which in all probability will be the pure cargo weight, since it may not be packed at that point) or the packer/3rd party warehouse, the entity named as shipper will need to be satisfied that the information is reliable and sufficient to provide VGM for the packed container, once the packing process is complete.
Step 3: Choose suitable process(es)
While physically weighing the packed container (Method 1) is a key option, many may seek to operate to a ‘Method 2’ process. Where reliance is placed on others, the contracting principal should ensure that all relevant partners are familiar with the VGM obligations and particularly require them to confirm that cargo tendered is physically weighed, using calibrated and certified equipment compliant in the country in which it is used. Unless such a shipper is also packing the container, they will probably only be able to confirm the mass of the cargo – which is not the same as VGM (it is an important part of a Method 2 process).
“Until the container is packed, no mass values equate to the VGM figure”
Until the container is packed, no mass values equate to the VGM figure. Reliance on accurate part information may be backed by contracts, indemnity wordings and suchlike, but fundamentally the person taking responsibility for VGM needs to carry out effective due diligence. Reliance on paperwork may not be worth much in a distant jurisdiction where the provider of the information may have few assets and little inclination to assist. The draft IMO circular on due diligence sets a sound standard for due diligence checks.
A co-load partner may pack part of the container, including using dunnage and securing, in the ‘container as a moving warehouse’ scenario. In that case, the principal needs to ensure that the co-load partner is aware of VGM, physically weighs all elements packed (cargo, dunnage & securing), and provides a ‘partial’ VGM for the cargo that has been packed. While bills of lading probably cover this, it is recommended that separate standard terms and conditions, including VGM obligations and indemnity, are set in place.
Whoever is acting as the final packer, including contracted warehouses, there must be auditable processes to demonstrate that all ‘partial’ VGMs are correctly summed, and then the tare mass of the container added at the end of the packing process. Only then can the shipper under the ocean carrier’s bill of lading be confident to provide an accurate VGM.
The diet of practicalities, due diligence and contractual provision might all suggest that Method 1 is ultimately more sustainable and less prone to uncertainty. We will see in the coming months.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club