It is a common rule in daily life that consumers would be charged a certain default fee for the temporary cancellation of train, plane and hotel reservations. But controversy occurs since the shipping company suddenly announces that it would collect “canceling booking surcharge”. Why doesn’t the shipping industry pay this charge that is reasonable in most industries?
Recently, Hapag-Lloydannounced on its official website that it would charge “cancelling booking surcharge” for Chinese mainland and Hong Kong in China. From April 1, 2020, customers would be charged for “Booking Cancellation Fee” within 7 days (including 7 days) of the vessel's expected departure date due to their personal reasons. The standard price is RMB 300 per order or HK $300 per order.
Hapag-Lloyd was not the first shipping company to levy the Booking Cancellation Fee. Maersk first announced in 2011 that it would impose the Booking Cancellation Fee. Although it was soon abolished, a number of shipping companies, including Maersk, Hapag-Lloyd and CMA CGM, had long imposed cancellation fees on certain routes. For example, on April 10, 2017, Maersk would charge Booking Cancellation Fee for the goods exported from Northern Europe to the Middle East, the Red Sea and IPBS (India, Pakistan, Bangladesh and Sri Lanka), the charge standard is 125 euros/container, and the settlement fee is 135 dollars/container for currencies other than euro; Maersk would charge a booking cancellation fee of $150 per shipment to and from Malawi, Zimbabwe, Zambia and Mozambique on September 15, 2019; On June 1, 2017, CMA CGM charged $150/TEU for cancellation of booking for the cargoes from Northern Europe to red Sea, Middle East, India, Pakistan and Sri Lanka; On June 9, 2017, if the booking was cancelled within 3 days before the sailing date, Heperot would charge a booking cancellation fee of $60 per order for the goods exported from Singapore to India.
The reason for the cancellation fee levied by the shipping company is very simple, which is to prevent the high cancellation rate in the industry. Robert van Troyne, the Chief executive officer in Maersk Asia Pacific, said that high cancellation rates are an industrial problem and that a 20 to 30 percent cancellation rate is normal in Asia, which seriously affects its service capability. Rolf Haben Jensen, the Chief executive officer of Hapag-Lloyd, also said that a quarter of booked space is cancelled, leading to higher costs for shipping companies. According to Alphaliner’s analysis, after Maersk imposed the booking cancellation fee in 2011, the number of cancellations at that time decreased by about 30 percent. Some industry insiders believe that by charging the cancellation fee, shipping companies and shippers could more accurately predict and manage the entire transportation process, and the whole industry would have more orderly and reasonable development.
But since shipping companies began to levy booking cancellation fees, the industry criticism of the cost has never stopped. The biggest controversy lies in that the shipper would be charged for canceling the order, while the shipping company takes the initiative to cancel the shipping space but does not need to make compensation. Therefore, the imbalance between the two sides of the obligation to charge the booking cancellation fee appeares to be “overlord treaty”. From the current situation, most of the booking cancellations are due to unexpected reasons, and there is no large-scale malicious cancellation of orders, and the earlier cancellations do not affect its second sale as well, so some shippers think that it is unreasonable to levy booking cancellation fees. Cai Jiaxiang, the vice President of China Association of Foreign Trade and Economic Enterprises, once suggested in an interview that both parties should adopt the principle of fairness and justice, and if the booking of cargo is cancelled for the owner’s personal reason , then the shipping enterprise could charge the owner of the booking cancellation fee; If the cargo is delayed due to the overallocation of the shipping enterprise, then the shipping enterprise should also pay the owner compensation, which is similar to “overallocation penalty”.
In addition, the ship-owning companies have not made a unified standard for the specific time, specific route and specific amount of the booking cancellation fees. To what extent would the the ship-owning companies be levied a cancellation fee? Why are the fees levied only on certain routes? According to what rules would the amount of cancellation fee be charged? At present, no ship-owning company has made relevant explanations for these problems. In fact, various ship-owning companies vary greatly in whether they should charge the fee or not, in charging range and in charging amount, making the charge rules appear to be very confused, and the industry inevitably would have questions about this problem.
More importantly, the world is now facing the threat of Covid-19. In order to prevent the virus epidemic from spreading, the shipping industry would be seriously damaged and more than 60% of the Asia-Europe line would be cancelled for a time, causing the global supply chain to be in disarray. The Chinese mainland and Hong Kong are among the earliest and hardest hit regions of COVID-19, in which a large number of factories have been forced to suspend production and normal port operations have also been affected to some extent. In the face of the unexpected situation caused by the pandemic, China National Railway Corporation LTD and Civil Aviation Administration of China announced at the early stage of the outbreak that passengers who voluntarily returned their tickets would be exempted from the cancellation fees; Overseas booking sites such as Airbnb and Booking.com have also announced that they would take measures to give customers a full refund if they cancel their reservation. Therefore, though the booking cancellation fee charged towards the Chinese mainland and Hong Kong, which was announced by Hapag-Lloyd would help to reduce the impact of the epidemic on its revenue, it seemed to be an “untimely” provision under the force majeure of various emergencies.
In fact, as a shipping giant founded in Germany, Hapag-Lloyd has always had the operation style which carris out the rigorous and meticulous German responsibility. And in the face of market changes, Hapag-Lloyd has always responded very quickly. Hapag-Lloyd was the first to announce the refrigerated container surcharge for containers berthed above ports and cancel the charge as soon as the demurrage problem was alleviated under the condition that Shanghai Port, Tianjin Port, Zhoushan Port in Ningbo and other ports have encountered storage yard congestion and lack storage capacity of refrigerated containers, which is affected by the epidemic. In November, 2018, Hapag-Lloyd unveiled its strategy in 2023, saying it would increase its profits, improve its service quality and become a global player in the container industry. Under the primary goal of improving business performance, a number of financial indicators of Hapag-Lloyd in 2019 increased significantly compared to the same period of last year. From the perspective of ship-owning companies, reducing their own risks and maintaining their market orders are the inevitable requirements for improving the performance targets, and the collection and cancellation of booking fees might be one of the feasible measures to actively “save themselves” in the depressed industry environment.
The actual effect of the booking cancellation fee remains to be determined, and the debate over the booking cancellation fee would probably continue to be discussed over and over again. Whether or not to levy the booking cancellation fee is a dispute between the ship-owning companies and shippers based on their respective interests. And how to make the shipping industry develop steadily under the premise of win-win situation might be an issue that every department in the global supply chain needs to think about and make active attempts.