Fitch: US Ports Face Uncertainty with Global Weight Regulations

NEW YORK--(BUSINESS WIRE)-- The implementation of International Maritime Organization requirements to verify weights of shipping containers is generating uncertainty at US ports, Fitch Ratings says. Fitch-rated ports have neither designated facilities for weighing containers nor the systems for the verification of container weights. This could raise already chronic congestion at the ports that are slowed by chassis management issues, higher cargo loads from larger vessels and inadequate inland or intermodal links.

Beginning on July 1, 2016, an amendment to the International Convention for the Safety of Life at Sea (SOLAS) will require the verified gross mass (VGM) of packed containers to be documented before carriers or terminal operators can load them. Carriers and terminals will be required to receive the VGM in time to use it to make the stowage plan for loading the ship.

While the shipper on the bill of lading will bear responsibility for verifying the weight, the apportionment of logistics and costs of verification among shippers, forwarders, terminals and carriers remains to be seen. The exact nature of documentation is also unknown, though forwarders and terminals favor the use of electronic data interchange systems that already communicate bookings and shipping instructions for about half of the 300,000 containers moved in the US daily.

US port terminals will almost certainly face containers at their gates that lack the required verification as the SOLAS amendment goes into effect. This may lead to delays and increased congestion for facilities that are already strained by longer turn times and heightened volumes generated by ever larger container ships. A slowdown seems likely in the early days of SOLAS enforcement as the broader supply chain learns how to manage compliance.

Several US terminals, including the Maher terminal at Port of New York/New Jersey, have stated they will require prior receipt of electronic documentation before allowing containers through their terminal gates. Some ports may choose to offer weighing services at their facilities, though higher volume terminals operators have indicated this is not likely to be a practical solution.

Over the longer term, we believe the risk posed to Fitch-rated US ports by the VGM mandate will decline. For smaller ports choosing to offer weighing services to delinquent containers, capital outlays to provide calibrated weighing equipment should be manageable. Forwarders and larger carriers will likely force the market to move toward an electronic industry standard that may ultimately lead to more efficient data management in terminals. We expect overall port throughput to rise in 2016, driven by industry consolidation favoring larger ships and implementation of operational alliances by shipping lines and ports.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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