Marked by blanked sailings, the weeks before and after the Lunar New Year have historically helped build demand after peak, holiday shipping. But in 2019, demand has been strong. So strong, that rates to both U.S. coasts have risen by double-digit percentages. Granted, this has mostly been strategic inventory front-loading in fear of March 1st tariffs, set to raise Chinese import goods to 25 percent, but the impact of added volumes has touched every level of the supply chain from maxed out warehousing to domestic delivery woes from equipment shortages.
Now, headed into carrier contract season, shippers and beneficial cargo owners have time over the Lunar New Year, February 5-19, 2019, to review freight agreements and brace for a massive bill as ocean carriers figure out how to split the costs of the International Maritime Organization’s (IMO) Low Sulfur Fuel Mandate.
Under the IMO’s new regulation, beginning January 1, 2020, ships must use fuel with a sulfur content no higher than 0.5% or contain equipment to clean its sulfuric emissions, known as a ‘scrubber.’ Carriers using heavy fuel oil (HFO) will be forced to integrate the adjustment into their 2019 rate contracts.
Vessels failing to meet the standard could be declared ‘unseaworthy,’ lose insurance coverage, and face steep fines & penalties. Shippers should be prepared for carrier clauses to include bunker surcharges as international trade finally takes a massive step towards environmental accountability.
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