Understanding The Reasons Carriers Implement a Shipping Embargo
If you rely on shipping and logistics services, then you have likely encountered the term “shipping embargo.” However, you may not be quite sure what a shipping embargo is, why carriers use them, or how they impact your bottom line.
With that in mind, we have created this guide. Below, we explain why carriers embargo freight and what these restrictions mean for your business.
What Is an Embargo?
In the logistics industry, the phrase “shipping embargo” refers to when a carrier stops receiving goods from clients. Shipping embargoes can be implemented by any carrier. However, they are most commonly used by less than truckload (LTL) shippers.
A prime example of an LTL shipper using an embargo is FedEx in 2021. The well-known LTL hauler garnered a ton of negative attention when they enacted embargoes on thousands of clients. However, doing so was a necessity at the time because the demand for shipping services far exceeded their current capabilities.
If FedEx had neglected to implement the embargo, clients across the nation would have experienced a lower quality of service. Instead, a select segment of clients suffered, rather than FedEx’s entire customer base.
Types of Embargo Freight
Carriers can embargo freight based on several different criteria. They may embargo freight of a particular type. Alternatively, they may institute a shipping embargo on an entire region.
The latter approach is a cost-control measure when demand for shipping services is exceptionally high. Typically, carriers will impose the shipping embargo on regions that have a higher cost of freight because they do not generate as much profit from these transactions.
Alternatively, carriers may restrict services based on freight characteristics. For instance, they may impose a shipping embargo on exceptionally heavy or large freight because these items consume more capacity on LTL trailers.
While many shipping embargoes are imposed by carriers, they can also be levied by the federal government. Currently, the United States has either a partial or full embargo against a multitude of different nations. When the U.S. imposes an embargo, carriers are prohibited from bringing the restricted goods to domestic ports from those nations.
Why Do Carriers Institute Shipping Embargoes?
The primary reason that carriers institute shipping embargoes is to reduce the strain on their resources. Prior to the turbulent events of 2020 and 2021, shipping embargoes were a seasonal occurrence.
Many LTL shippers would embargo freight from certain regions during the peak shipping season, which is typically in late November or early December.
However, the shipping embargoes that have been imposed over the last two years are some of the most comprehensive in history. In 2021, shipping embargoes were particularly restrictive because the demand for logistics services soared as the economy began to rebound.
By imposing shipping embargoes, carriers can better regulate their resources. They can temporarily stop serving clients in congested regions so that drivers are not forced to spend countless hours waiting to dock and offload their shipments.
When selecting where to impose shipping embargoes, carriers will often target areas that do not generate as much revenue so that they can maintain strong profit margins.
How Long Does a Shipping Embargo Last?
By nature, shipping embargoes are designed to be temporary until the demand for LTL hauling services stabilizes. However, there is not always a set deadline for when a shipping embargo will end. Even if a carrier provides clients with a timetable for ending a shipping embargo, they can always extend this date if needed.
Shipping embargoes can last as little as a few days to as long as several months. The length of the embargo will be based on the needs of the carrier and market conditions.
Due to the unpredictability of embargoes, they can be incredibly frustrating for business owners who need shipping services. That is why many business owners partner with third-party logistics providers.
How a 3PL Can Help
Navigating the complexities of shipping embargoes can be challenging. Not only can shipping embargoes drive up the cost of shipping services, but dealing with this hassle can shift your focus away from managing the needs of your organization.
Fortunately, you can avoid shipping embargo headaches by partnering with an award-winning third-party logistics (3PL) provider like R2 Logistics. We offer access to logistics experts and an innovative transportation management solution. Contact us today to learn more.