12 Apr 2016 17:07 IST

Trouble on the high seas

With no regulations in place, one-time retail consumers are at the mercy of shipping chain players

Maritime transport is essential to the global economy, as over 90 per cent of the world’s trade is via sea and it is, by far, the most cost-effective way to move en masse goods and raw materials around the world.

This true statement is prominently displayed on the website of the International Maritime Organization (IMO), a UN agency that regulates international shipping. Most of us do not appreciate the crucial role shipping plays in our daily lives. When we buy a Chinese-made mobile phone, we don’t think of its journey from the Chinese hinterland to the Indian store shelf. Just like how the happenings in a theatre green room are rarely revealed to the audience, the entire lifecycle of commercial, marine shipping is hidden from the average customer’s view.

Consequently, there is little need for government-enforced consumer protections because the market self corrects: a product damaged or delayed in shipping never makes it to the store shelf. In any case, the IMO operates at a level several layers higher from the consumer — for example, focusing more on ensuring safe, secure and efficient shipping on clean oceans.

The minority

But a small minority of ordinary citizens can and do get involved with maritime shipping, as retail customers of the industry. These are the expatriates, diplomats, government officials and business people, who ship their household goods to a different country to relocate or spend extended periods of time on assignment. They engage services of the huge but highly fragmented “moving industry”, whether to ship items across towns or around the globe.

No one knows how large the global moving service industry really is. Professional packers, movers, companies which make moving products like crates, packing tape, and corrugated cardboard boxes, insurance companies, truckers, freight railroads, Customs brokers and the global shipping lines, are all independent cogs in a complex system, which generally runs in a well-oiled fashion with little or no regulation.

Which is problematic in case issues arise. When there are problems, inexperienced retail consumers have nowhere to turn to for support. When disputes arise, seeking redress through the courts is impractical because so many jurisdictions are involved and it is not clear which factor takes precedence in determining jurisdiction.

Standardisation

The first thing to note is that you do not call the nearest shipping line for quotes. The world’s big shipping companies, whose containers can often be seen near ports — AP Møller-Maersk, Hapag-Lloyd, CMA CGM — are too big to deal with a small retail customer. You have to, therefore, book your shipping slot on the big lines through a shipping agent/customs broker who can also handle packing services for you.

The shipping industry has standardised its hardware for efficiency. In developing the intermodal freight container, it has made it easy for customers to ship goods from one mode of transport (such as truck) to another (such as rail or ship) without unloading and reloading the container.

To speed Customs shipments in and out of the country, the Indian government has built a network of inland Customs terminals so that the burden on ports is reduced. Once inspections are completed, the entire container is locked and sealed under the supervision of a Customs officer. From that moment onwards, the container is deemed an international shipment, even if it is plying on Indian railroads and highways to reach the shipping port. At the shipping port, the sealed container is directly loaded onto its designated ship.

Standardisation, however, means that options are limited for the customer. Much like Henry Ford’s famous quote — “Any customer can have a car painted any colour that he wants so long as it is black” — the shipping industry has limited container sizes — 20 feet and 40 feet.

Experts say it is better to pack a container tight into a 20-feet container and leave behind overage articles rather than pack everything into a 40-feet container, where items could be loose. It is difficult to tie each article down given different sizes and shapes, and heavy seas can easily damage loose articles.

Insurance choices

To protect against damage, shippers offer many insurance choices — ranging from “All Risk” to “Movers Risk”.

In an All Risk policy, your shipment is covered against all possible risks such as breakage, damage, theft, pilferage, part delivery, non-delivery, fire, earthquake, collision, and accidents. A necessary precondition is that the goods be packed by the company that will ship the container. Premiums typically run 3-4 per cent of shipment value for 0 per cent deductible coverage — and the policy requires you to cover at least $10,000 in value.

At the other end is “Movers Risk”. Here, the shipper’s liability for loss or damage to your goods or shipment is generally limited to a maximum of $0.60 per lb per article or package while the goods are in the shipper’s physical possession. So if your TV weighs 70 lbs and it has been damaged, the shipper will reimburse you a grand total of $42!

Given all the nuances, selecting a reliable shipping agent is crucial. This company has to act in good faith as the single point of contact throughout your container’s journey, dealing with various players in the shipping value chain. It has an obligation to always represent your best interests, serve as your advisor and fight on your behalf when there are issues.

Shipping agents

A Google search yields many results but it is hard for customers to tell a good agent from a bad one. Online reviews, even on sites like Yelp, are unreliable because many are written by companies themselves. Unsuspecting customers often go by company names but, like they say, don’t judge a book by its cover. One company, End2End Global, gives you the impression that everything will be under control through the shipping cycle, but nothing can be further from the truth.

Written assurances about what will and will not be covered are often meaningless once the container leaves the customer’s premises. Because when problems arise, shipping agents are notorious for throwing up their hands, saying they have little control over “acts of God”. There is no compensation when there are delays due to port strikes, port congestion, mechanical trouble or Customs delays.

With so many players involved, often in different countries, passing of blame is common. With no accountability, there is no responsibility, and consumers are left to fend for themselves. Worse, consumers are often double-charged by counterparties in destination countries because communication mechanisms with host agents are weak. The name End2End Global is a huge misnomer here.

This is an industry that needs to be regulated, just like the taxis, long-distance buses or the airline industry. Until the law acts as a referee, one-time retail consumers are vulnerable to the whims and fancies of individual players through every part of the shipping value chain, with no recourse but to pray.

In this day and age, there really has got to be a better way.

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