The domino effect of incorrect documentation in shipping and freight

 

The business of shipping involves a complex array of documents from invoices to packing lists to certificates to bills of lading. Each of these documents has its own usage in a cargo’s journey covering specific details essential for the smooth movement of the goods.  

If these documents have incorrect information or errors, the consequences can be severe, leading to financial losses, legal complications, and supply chain disruptions. 

In this article we take a look at the consequences of incorrect documentation in shipping. 

 

Incorrect declaration 

Incorrect data captured in customs documents or mis-declared data can delay clearing goods, especially at border checkpoints. It can also lead to increased duty charges or underpayment of duties leading to penalties or cargo seizure depending on the discretion of the customs officers.

Incorrect declaration or incorrect updation of cargo weights due to manual entries can lead to maritime disasters as seen in several cases. 

 

A study by the National Cargo Bureau (NCB) [2] found that most containers inspected had issues with mis-declared or improperly stowed cargo.

• Of the 500 containers inspected, 55% failed with one or more deficiencies.

• 69% of import containers containing dangerous goods failed, and

• 38% of export containers with dangerous goods failed, including how cargo was secured, labeled, or declared.

Regulatory authorities rely on accurate paperwork to ensure compliance with international trade laws. A mismatch in the details can flag the cargo or place the company under observation for the future.

 

Rerouting or cargo loss  

Incorrect documentation may also reroute the cargo to a different destination than originally planned. This could lead to delays in order fulfillment, misplaced cargo, losses, and other logistical and contractual issues. 

Payment and contractual breaches could also occur due to this rerouting resulting from this incorrect documentation. This is particularly critical in shipments that are time-sensitive or perishable in nature.

 

Cost of fixing errors

Documentation errors in shipping can often be time consuming and expensive to rectify. It could involve additional freight costs, administrative expenses, penalties from authorities in different countries, legal fees, demurrage and detention and several others. In addition, it could also involve losing time for delivery of goods and loss of reputation.

 

The cost of fixing these errors includes but is not limited to:

• Additional freight for rerouted cargo

• Administrative fees by customs, ports, and other authorities

• Demurrage/Detention from shipping lines, depending on the route and port, could be as high as $2478 per day/container (New York - as per Container xChange)

• Loss of business and revenue

 

In addition, incorrect documentation can lead to legal entanglements as mis-declared cargo or inaccurate information can be interpreted as fraud potentially resulting in lawsuits or blacklisting.  

 

Insurance claims

Many insurance claims in shipping hinge on the accuracy of the shipping documentation. Documentary errors can sometimes render claims invalid, especially if the proper insurance coverage has not been considered. 

This can lead many businesses without recourse to recover their losses. Such issues could also impact future insurance premiums for those businesses. 

 

Reputational Damage

Delays, losses, and costs caused by incorrect documentation also can create reputational damage to the business. Clients expect their logistics partners and suppliers to be reliable. Repeated mistakes in paperwork due to manual capture or other issues can erode trust and reputation, leading to lost business opportunities.

 

Conclusion

Preventing documentation errors is key to ensuring a seamless trade. Investing in digital platforms like ODeX can help businesses avoid the pitfalls of manual errors.

As per DCSA’s latest information, out of the 45+ million bills of lading issued by container shipping lines, only about 3.8% are electronically issued, with the balance being still issued as paper bills of lading, including those manually captured.

This level of manual work can potentially create several errors, resulting in incorrect documentation and leading to the abovementioned challenges.

ODeX provides a centralized system to digitally manage shipping documentation and payment, ensuring consistency, accuracy, compliance, and real-time updates. This allows businesses to verify and rectify any discrepancies before they escalate. 

 

Transform your shipping documentation process, reduce risks, and keep your supply chain efficient and reliable. Contact our ODeX team for further information.