From the days-old tragedy that has rocked Baltimore and attacks on ships en route to the Suez Canal, to geopolitical tensions affecting shipping in the Black Sea and climate change impacting movements in the Panama Canal… global shipping continues to face tensions. With increasing costs, time spent in transit, and knock-on economic challenges, shipping companies face uncertainty as ‘plan b’ options seemingly diminish. Is there a solution? Jon Bass, Head of Sales and Customer Partnerships at Azarc® summarizes the challenges facing forwarders and Azarc®’s solution that helps minimize delays and keep costs under control…
2024 began with a shipping crisis in the Red Sea, as attacks by Houthi rebels on ships bound for the Suez Canal saw countless global shipping firms press pause on all cargo movements along this crucial international trade route.
With the Francis Scott Key Bridge in Baltimore collapsing on Tuesday (March 26, 2024) due to a cargo ship (the Dali ship) crashing into one of its supports, the 1.6-mile-long structure crumbled instantly. This event has indefinitely shut down one of the busiest and most vital ports on the eastern seaboard of the US, leading to renewed worries in the industry regarding delays and inevitable increased costs.
What weight do these incidents hold?
Looking at just the Suez Canal, the effects of the Houthi attacks are substantial. Rerouting shipments around the Cape of Good Hope adds about 3,000-3,500 nautical miles (6,000km) to European and Asian journeys. Per (round) trip, this adds about 10 days duration at a cost of up to $1m in extra fuel.
The prospect of lengthier shipping times is the tip of the iceberg too.
Turnaround times at ports in the UK and large European hubs such as Rotterdam, Antwerp, and Hamburg* and the impact these delays pose have to be taken into account too. Then consider the fact that insurance costs are rising, as well as the overall cost of shipping – albeit lower than Covid disruption levels and the picture pulling into focus paints a concerning scene.
In recent coverage, the United Nations Conference on Trade and Development ‘raised the alarm’ on global trade disruptions. UNCTAD’s Head of Trade Logistics, Jan Hoffmann, underlined maritime transport’s critical role in international trade, noting that it is responsible for approximately 80% of the global movement of goods.
The report further outlines how far the impact of these collective crises is rippling.
- In response to the Red Sea plight weekly container ship transits plummeted by 67%.
- Average container shipping spot rates more than doubled (+122%) from Shanghai since early December while the rates from Shanghai to Europe specifically more than tripled (+256%).
- Additionally, ships rerouted from the Suez and Panama Canal are pressured to travel faster to compensate for any detours, burning more fuel per mile and emitting more CO2.
And, as Hoffmann highlights in the coverage, this is where the global impact of the collective crisis really comes to a head: “Developing countries are particularly vulnerable to these disruptions, and UNCTAD remains vigilant in monitoring the evolving situation,” Mr. Hoffmann said.
All of these headlines confirm news the industry has long been aware of and is warming up to – adapting its ‘business as usual’. Adaptions to processes are needed urgently, and even when the current crises are overcome, collaboration across international waters is absolutely necessary to reshape what the future of the industry looks like.
What next?
That future does not exist without automation. The Electronic Trade Documents Act has already delivered tangible trade benefits in the UK, with the ICC reporting commercial advantages stemming from digital trade transactions available today including an 80% reduction in border waiting times, an 18% decrease in shipping costs, and hundreds of pounds in savings.
“We have seen this firsthand,” says Jon, “through our work with BT CCS and developing Rune. BT CCS wanted to expand its reach and offer more integrated solutions for its existing communities in the post-Brexit UK, as it looked towards communicating and trading with the EU in its reformed state.
“That was a year ago… fast-forward to the present and traders are saving time, money, and effort across the board. What’s more, they’re speeding up processes by removing any friction caused by paperwork and antiquated processes. A groundbreaking automated custom clearance service, Rune was designed to tackle exactly the challenges being faced by the global shipping industry, challenges that will still today exist even without the current disturbances in Baltimore, the Suez and Panama Canals.”
Since Rune launched as part of the Ecosystem of Trust – the pilot program in partnership with the UK Government and BT to create a long-lasting global impact for those transporting cross-border goods within the UK – it has without doubt harnessed and fulfilled the potential of digital automation, including being involved in the very first UK Export to operate under the Electronic Trade Document Act (ETDA) to Singapore on the day the UK act came into force.
The report assessing the outcomes of Ecosystem of Trust – released by the UK Government, Cabinet Office, and International Chamber of Commerce in Q3 of 2023 – stands as a testament to the entire initiative’s success, as well as that of Rune:
- 40% cost reduction on customs clearances using Rune
- 75% reduction in paperwork using Rune
- Enhanced supply chain data boosted frontline targeting team confidence, reducing decision-making time by up to 17%
- Supply-chain data can fulfil 80% of customs’ minimum risk requirements and 60% of trade statistics needs.
- Up to £225m of administrative burden saved per annum when automating customs declarations. It will likely reduce the industry’s customs data collection costs by 40%.
With Rune, Azarc®, its world-class team, and partners, can help ensure delayed shipments – such as those being rerouted from the Suez and Panama Canals – flow through customs clearances quickly and less costly.
To speak to the team about how Azarc® can support your shipping challenges and help automate your customs clearance processes, get in touch.
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