Featured Headlines:
USTR Extends 352 Exclusions On Day 350
CBMA Changes Are Coming to Town
MID Pilot Program Takes Flight
Down Through the Chimney Go Trucking Rates
USTR Extends 352 Exclusions On Day 350
- On December 16th, the Office of the US Trade Representative (USTR) extended Section 301 tariff exclusions on 352 products from China—originally set to expire on December 31, 2022—for an additional nine months.
- The extensions will apply as of January 1, 2023 and will continue through September 30, 2023.
- Importers can submit comments regarding the extension of these products until January 17, 2023.
- Click here to access the Federal Register Notice, which contains the full list of exclusions, as well as directions for submitting public comments.
- For any burning questions regarding Section 301 tariffs, please reach out to our compliance experts!
CBMA Changes Are Coming to Town
- As a reminder, the Craft Beverage Modernization Act (CBMA) will move from US Customs and Border Protection’s (CBP) jurisdiction to the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) jurisdiction beginning next year.
- Effective January 1, 2023, importers will no longer file CBMA at entry and will move to a TTB refund program instead. As a result, importers will have to pay the full excise tax rate for all alcoholic products at the time of entry.
- Importers should note that all required documents will still need to be maintained and submitted to TTB upon request.
- Click here to watch a short TTB video about the changes coming in 2023!
MID Pilot Program Takes Flight
- CBP announced plans to move forward with a pilot program to replace the Manufacturer’s Identification Number (MID) with a Global Business Identifier (GBI) in an effort to provide better information on foreign business entities, supply chain roles, and related data.
- Between December 19, 2022 and July 21, 2023, CBP will conduct the GBI Evaluative Proof of Concept (EPoC) test. The test will be limited to certain entry types, certain commodities, and certain countries of origin.
- During the testing phase, volunteer participants will provide the following 3 entity identifiers for manufacturers, shippers, and sellers (in addition to all other required data, such as the MID):
- Legal Entity Identifier (LEI) – 20 digits
- Data Universal Numbering System (DUNS) number– 9 digits
- Global Location Number (GLN) – 13 digits
- After the testing process, officials will evaluate whether these 3 GBI’s—either singly or together—ensure that CBP and Participating Government Agencies (PGA) receive standardized trade data in a universally compatible language.
- For more information, check out the CBP Media Release or Federal Register Notice.
Down Through the Chimney Go Trucking Rates
- After surging early in the year, data from DAT Freight and Analytics reveals tougher times for the truckload spot market today. While these declines don’t compete with ocean freight’s freefall, they do give the stomach that airplane turbulence flutter. Check out the rate trends since February:
- Reefers are down 18.8%
- Standard vans are down 18.5%
- Flatbeds are down 7.1%
- While all three full trailer load (FTL) modes are down since September, only flatbeds are down by more than 5%. The writers of this newsletter wish to apologize—but the extra eggnog has limited our ability to write jokes about flatbeds due to our fatheads.
- So, what can we expect in 2023, Shapiro? Thank you for asking, dear recently fattened readers! Most industry analysts believe that FTL spot rates may well fall another 10% by the end of Q1, while contract rates will reach their nadir in Q3, again down about 10%.
- Sadly, most truckers, brokers, and domestic 3PLs are forced to appeal to their most favored higher powers for weather like we just witnessed. Terrible winter weather disrupts domestic routes, strands cargo, and displaces the trucks themselves. All of this serves to prop up prices, dislocate supply, and build up “artificial” demand.
- Last note: for context, remember that demand and rates for all modes of trucking are still higher than in 2021 and significantly higher than in 2020 or 2019. The declines we see today reflect a normalization in trade, and the expected lows of 2023 should establish a baseline that sits higher than 2020.
Hooked on Drop and Hooks
- We have reported extensively on increasing US warehousing costs and declining vacancy rates because, frankly, we are very smart! However, we were not smart enough to foresee the explosion in trailer orders and the emergence of drop-and-pick technology. We hope our reputation has not dropped, and you will remain hooked on this newsletter!
- FTR Transportation Intelligence reports a nearly 160% increase in trailer orders since July as trucking firms, shippers, and 3PLs violently push and shove for purchase orders. Well, okay, it isn’t violent, but that just sounded so much more exciting!
- The key to the trailer order binge is shipper flexibility/storage and carrier productivity brought to the table by the increasing need for drop-and-pick programs.
- Shippers increasingly need more readily available storage and the flexibility to serve e-commerce operations nimbly and rapidly. At the same time, they want to escape increasing detention charges, less unloading time allowed, and real estate realities that make it harder to unload quickly. A drop-and-pick program is a great solution all-around.
- From the carrier perspective, truckers dance jigs while smiling ear-to-ear when they don’t have to wait to unload while sitting in bleak break rooms with old magazines and questionably clean facilities. BIG productivity boost! The palpable joy!
- The JOC reports that companies like Ryder enter the equation as matchmakers for trailers. Using their vehicle-sharing technology, Ryder can connect over 50,000 trucks with 50,000 trailers from over 10,000 businesses. The race is on, and Ryder will not be alone at the summit of Drop-and-Pick Mountain for long.
Prank Airings?
- If the steamship lines can blank sailings, then why can’t airlines offer prank airings? Well, it turns out they can! To prop up rates and profits, airlines cancelled over 50% of all freighters from China to the US in mid-December. How clever! And how popular with Earth-loving environmentalists!
- After nine straight months of air cargo volume declines, it’s almost hard to blame the airlines in this case—but we sure would prefer to do so! When looking at 2021, the trends are much worse; year-over-year (YoY) chargeable weight declines hit 8% for October and November and are expected to fare even worse in December.
- Fortunately, the airlines continue to effectively consolidate cargo volumes, as the industry dynamic load factor was a respectable 61% last month. However, last year, we witnessed Q4 average load factors above 80% for the best managed months.
- With consumer demand hobbled by inflation, and ocean freight now being offered free when you open a checking account, the immediate growth picture for airfreight is hardly promising. Let’s put it this way…if airfreight were a child, you wouldn’t count on that basketball scholarship. Thus, forwarders and shippers are either forgoing contracts altogether or signing three-month deals. Longer-term deals are essentially non-existent today.
- Put your “cheaters” on, gang, because we’re going to evaluate rate trends. Globally, airfreight rates were down about 25% in October and November compared to a year ago—with average rates hitting the same levels seen in October 2020. Before you go looking for that checkbook buried in your desks, global airfreight rates remain 85% higher than pre-pandemic levels. No airline charity deductions for you, noble readers!
- A closer look at the Transpacific corridor (to the US West Coast) for air cargo shows a similar but more extreme picture. October and November rates are down over 30% YoY, but they remain 139% higher than 2019 averages.
- And now, ladies and gentlemen, for our highest degree of difficulty bullet point yet…Please place your hands over the children’s eyes!
- We have just said that Transpacific air rates slipped 30% from last year, while remaining 139% higher than 2019. Comparing this to ocean freight (to USWC), we find that ocean rates are down 82% in a year and remain only 30% higher than 2019 levels. However, when we look at Europe to the US East Coast, airfreight has slipped 37% compared to 2021, while achieving 109% since 2019. And what about ocean freight…? Rates are up 10% since last year and an astounding 242% higher than 2019.
- The conclusion of that perfect 10 of a bullet point, you ask? Airfreight is considerably more competitive than ocean from Europe to the US versus the rest of the planet. For all you ocean shippers from Europe, Shapiro will gladly accept all of your new air bookings!
The Horrific Pacific
- Hey, you shouldn’t have! Thanks for thinking of us Hapag, O.N.E., Hyundai, and Yang Ming! Last week, you canceled 80% of your voyages from Asia to LA/Long Beach; and you rolled everyone’s cargo just before Santa scooted his large rumpus down our chimneys. How ‘bout some coal next year, THE Alliance? A sooty stocking certainly beats this so-called gift, y’all!
- The pre-early-Chinese New Year (CNY) rush may not be impressive, but demand to the USWC is up nicely; and combined with 20% blank levels… (or EIGHTY PERCENT from one alliance, which will remain unnamed) …the freefall of rates for this trade lane is held in check, at least temporarily. Overall load factors are near 100% for the USWC, thanks in large part to supply manipulation and some valuable and timely advice from The Grinch.
- Not to be outdone, Scrooge suggested that some carriers should re-implement premium surcharges to ensure cargo loading. Wait—so, naming a fair price to guarantee space is NOT on the holiday table? We should have a below-breakeven price that doesn’t move cargo and then add surcharges to move it? Yes, this makes PERFECT sense!
- Then again, this is the time of year that many of us cut down a tree from the great outdoors and drag it inside, while also taking lights from the inside to hang on the outside. Thus, we think it is obvious that the ocean carriers are manipulating the market out of holiday cheer…Phew!
- Despite blank sailing levels above 25% last week, the USEC and Gulf lanes just don’t have the demand juice to squeeze out further rate reductions. This said, most prognosticators believe rates will significantly flatten beginning in late January.
- In other news, when polled, most industry prognosticators prefer to be called “visionary”, “oracle”, “diviner”, or “prophet” instead. Noted!
- While it is extraordinarily fun to tease those gigantic, well-connected, filthy-rich steamship lines, you wouldn’t be in the holiday spirit if your rates had fallen 82% to the USWC and 71% to the USEC since late June. Well, you wouldn’t, would you?!
- The number of vessels stranded at US ports that are still hoping to make it to that rockin’ New Year’s Eve party? A slender 49. This is the first time it has been below 50 since the Sumerians invented human language in 3500 BC! Okay, okay…but it has been a solid two plus years.
