Do you know how long it takes to clear containers at seaports?
In the US, it can take between 3 and 5 business days. In China, most time, it runs up to 5 business days. And in other parts of the world, it can take up to 7 active working days.
This is required to complete the clearing process and get the right customs documentation. Naturally, one might assume the clearing process takes this long is because there are many containers to attend to. Granted. That may be right. After all, many ships have more than 10,000 containers on board.
In reality, though, that’s not the case. The real reason your containers take forever at ports is because of the ‘outdated’ identification processes adopted by many port authorities.
This old system takes lots of documentations and verifications to ascertain ‘who owns what.’ And this gives rise to unnecessary delays in the whole process.
Fortunately, the great minds at the International Organization for Standardization came up with the idea of Legal Entity Identifier – a 20-character, alpha-numeric code based on the ISO 17442 standard developed. This code, or the LEI Number for short, connects to key reference information about businesses, enabling quick and unique entity identification. In short, with LEI Legal entity identifier, it became easier for all involved in the shipping industry to track and dispatch shipments quickly.
They simply assigned the LEI of a company to its containers, just like we attach barcodes to products in stores.
Up until 2020, everything was working well and going as planned. Then the unexpected happened – COVID-19 struck. And that changed the global shipping game.
The global supply chain crisis and the post-pandemic world
The pandemic affected the global supply chain in more ways than it did other industries. For perspective, it broke the entire supply line by causing shortages of workers at ports, company warehouses, and even amongst truck drivers.
Without enough workers on the ground at the ports to unload shipments and clear containers, what we’d have is a stockpile of boxes at our depots, ports, and transshipment hubs. Which is exactly what we have right now. Just look up important port hubs like the Nehru Port in Navi Mumbai or the port of Los Angeles (America’s Port) to see for yourself how things are.
And not just that.
The pandemic also took out important truck drivers from the equation. The American Trucking Associations estimates the industry is some 80,000 drivers short of the workers needed to keep goods moving.
This means that the global supply line is left to work with this shortage. As expected, without enough drivers in the trade flow, it becomes impossible to drive unloaded containers away from depots. After all, trucks haul more than 70% of domestic cargo shipments.
Consequently, this leads to a pile-up of boxes at the ports, which then prevents new container shipments arriving from having enough berths at the ports to unload their containers.
The disbursement of stimulus checks and the enforcement of lockdowns during the pandemic didn’t help matters, too. At that time, many families and consumers were forced to channel money towards goods-based products rather than service-based ones. This led to increased demand for e-commerce goods – something manufacturers and logistics companies weren’t prepared for. So to keep up with the sudden hike in demands, most shipping companies favored moving stuffed boxes in, foregoeing the hauling of empty ones in the reverse direction.
Over time, ports became packed with emptied containers no one was willing to drive away.
Summary of the crisis
To summarize the whole matter, it’s clear that the major hurdle facing the global supply chain is the shortage of sufficient labor across the entire line.
The ports need more hands to help with shipment clearing. Stakeholders need to be encouraged to get empty containers back to exporting countries. And the truck driving industry needs immediate support with new trucks, trailers, and workers.
Whether and when those will come remains to be seen. For now, let’s address a pressing subject: how can lei number, which has saved the shipping industry in the past, come to its rescue again?
How can Legal Entity Identifier help with the global supply crisis?
We have to remember that the LEI is a digital identification system. Meaning that its primary aim is to help with entity verification. Clearly, most of the challenges facing the global supply chain right now are not solely identity-related. It goes beyond that.
However, that’s not to say the Legal Entity Identifier cannot play some parts, too. There are certain issues plaguing the supply chain that LEI can eradicate. This is why we keep encouraging business owners, organizations, and agencies to apply for LEI Number.
- LEI can help make container identification easier
By stamping some form of LEI-based identifier on a company’s container (like barcodes), it becomes easier to track who owns the container at any point in the supply chain.
For example, say a container has been unloaded from a shipment, and then the shipping company has refused to return the emptied container to where it belongs. An LEI identifier can help to quickly identify and reach out to this company.
- Shipment clearing
The faster the ports can identify ‘who owns what,’ the easier it is for them to clear shipments.
Think about it; a ship arrives at an already-congested port with 10,000 new containers waiting to be identified and cleared. If the workers have to rely on old verification systems, going through all the shipments will take days.
However, with a Legal Entity Identifier checking system in place, the verification will be completed in a matter of hours rather than days.
With that, no new containers will be thrown into the growing queue.
- Digitalized system of authentication
Having to go through a series of paperwork and documentation to authenticate a shipment is a load of work. Not only is this draining on an already-slim workforce, but it is also time-consuming.
A much better approach is the idea of deploying the machine-readable LEI Codes. As described earlier, the legal entity identifier codes are alphanumeric, meaning they can be integrated into software systems and management portals. Just like your garage door barcodes.
It becomes easy to identify containers in this form as you simply have to run a scan on them. And in a twinkle of an eye, you’ll have everything you need to know about a container.
- Eliminate trust issues
With the global shipping industry still in a precarious situation, the last thing you want is your truck arriving late at the port to pick up your shipment. As a shipping or logistics company, it’s crucial that you get to your cargo in time.
If not only to beat existing queues at the port, then to prevent your shipment from getting classified with the yet-to-be-claimed ones.
Unfortunately, sometimes delay might come from unexpected places. For instance, your financial institution may have issues with your KYC identification, and as such, may refuse to disburse the funds you need for cargo clearing. Or the port’s authority might have reasons to doubt your ownership.
In any case, a great way to ensure you never run into any identity-related challenge is by getting an LEI number. As a globally-accepted identifier, an LEI code can serve as your trusted identifier both in the supply chain and other business areas.