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An Important Export Enforcement Review
How to Find Harmony in 2023
- The US International Trade Commission (USITC) recently published its annual update to the Harmonized Tariff Schedule (HTS) for the 2023 calendar year.
- The change record modifications went into effect on January 1, 2023; and reflect all updates made to the HTS since the last printed edition (February 2022).
- There were a large number of changes and revisions to the tariff schedule throughout 2022. As a result, the USITC has also included a separate list of changes made between January and December 2022.
- Click here to view the full list of changes contained in the HTSUS 2023 Basic Edition.
- Please reach out to our compliance experts with any burning classification questions!
An Important Export Enforcement Review
- The Bureau of Industry and Security (BIS)—which falls under the US Department of Commerce—has also released its annual Export Enforcement Review, which details the list of actions taken over the past calendar year.
- Some of the changes included in the 2022 report include, but are not limited to the following:
- Made charging letters public upon filing;
- Eliminated “no admit, no deny” settlements;
- Raised penalty amounts for the most serious violations.
- Implemented non-monetary resolutions for cases without serious harm;
- Revised the voluntary self-disclosure (VSD) process to fast track most resolutions; and
- Made enforcement actions easy to access on the BIS webpage.
- Find out more about the full list of actions taken against US national security threats in the Export Enforcement: 2022 Year in Review.
Don't Pray For Dray
- Let’s pause a moment and remember what it was like to pick-up containers and secure drayage as recently as six months ago. This was an all-too-common recipe at the time:
- Pre-dispatch your containers to dray truckers at time of sailing (typically a month or more before expected arrival) …. High five a co-worker.
- Receive six or seven rate increases and eight or nine fuel adjustments during transit…Bite fingernails.
- Attempt to confirm appointment with original dray carrier—Get rejected…Shake fist.
- Call 237 other possible dray carriers. Find ONE at twice the original rate…Roll eyes, shake fist, and pull hair.
- Wait weeks—not days—for vessel to berth and process…Consider opening a coffee and bagel shop.
- Wait another week for container and chassis to find each other in the stacks, fall in love, and be found by a longshoreman…. Sigh AND shake fist!
- Have the new, expensive dray carrier show up at port, wait several hours, get dangerously frustrated, and leave the port without your recently matched container and chassis… Decide it isn’t nice to imagine dray-port worker cage matches!
- Fight with the terminal, the ocean carrier, and your new bestie dray carrier on demurrage since some of it was outside your control and some of it was apparently inside your control…Tell your spouse you coulda been a good lawyer.
- Pay the demurrage yourself after consulting with your rabbi, priest, or pastor (or all three!) …Look up equivalents to a rosary in other religions.
- Talk the dray carrier into going back into port after another 10% rate increase…Buy that coffee and bagel shop!!
- We’ll spare you the rest of this recipe, but there are still a good 10-15 more steps ahead of getting the ^#&#^#$-ing container actually delivered and the empty (with beloved chassis) “back home.” We’ll try not to imagine the millions of gallons of spilled milk money that accompanied the madness of yesterday’s drayage reality.
- We are VERY pleased to announce that every single sizable US gateway seaport or rail ramp is now supplied with dray power at “normal” or “near normal” levels. The remaining problem—or “near normal” areas—are primarily at Midwest rail ramps.
- And, if you have an email address (and many of you do!), you have already heard from at least those 237 dray carriers above about future loads!
The LTL Swell
- While we watched ocean freight rise a record 700% in 12 months during Covid, the US Bureau of Labor Statistics (BLS) reports that the less-than-trailer-load (LTL) domestic freight producer price index rose an unprecedented 40% from 2020 to June 2022.
- Long-distance LTL rose more than 50% over the same period, as shippers were increasingly desperate to achieve maximum speed to market—especially with average ocean transits badly stretched by extreme congestion.
- While we find it difficult to write a good joke about LTL, the deterioration of established LTL routes, networks and cargo patterns during the pandemic was no laughing matter!
- Essentially, high demand, lack of capacity for LTL (and FTL), and worker absenteeism combined to wreak ultimate havoc on LTL networks (and shippers’ budgets, unfortunately!).
- We sometimes forget just how labor-heavy LTL operations remain. From cargo handlers to warehouse fork-lift operators to all the trucks that provide the “spokes” for the “hub and spoke” model, Covid was particularly difficult for this domestic mode.
- Fortunately, shippers should see two new swells in 2023: a) a return to dependable shipping patterns/domestic transits and b) a swell in LTL affordability for shippers!
The Global Mix and Match
- Positive: Impressively, the United Kingdom’s (UK) Southhampton Port reduced her contribution of carbon to Mother Nature by 55% in 2022. Southhampton was the first port in the UK to fully switch to hydrotreated vegetable oils (HVO) for on-port fuel needs.
- Negative: Nobody seemed to notice that labor strife and on-going disputes between ownership and stevedore unions reduced Southhampton’s cargo throughput by 90%. Okay, okay, just kidding!
- Positive: If we put the UK’s environmental efforts in context, improvements at Southhampton (HVO) and London Gateway (electric vehicles) in 2023 will be as consequential as removing 300,000 trucks and 8,000 family cars from the English domestic supply chain. Bravo!
- Negative: A ship broker has confirmed that 20 containers fell directly into the murky waters of Mundra, India after crane operators failed to realize that the berthed vessel was configured to be multi-purpose.
- Positive: It is believed that the products inside the jettisoned containers all fall within the broad category of “leisurewear.” After Covid, we need fewer blanket pajamas GLOBALLY, gang! If it includes footies, we beg you to reconsider!
- Positive: Adani Ports and Special Economic Zone Limited (APSEZ) and Gadot Chemical Terminals have completed the acquisition of the Port of Haifa in Israel.
- Negative: Like so many of us today, highly classified US intelligence documents were found in the offices of both buying companies involved in the purchase. Ouch.
- Negative: As predicted, ocean carriers are both slow steaming and deploying their larger vessels where the “fishing is good.” Surplus capacity simply MUST be put to productive use some place.
- Negative: Maersk described the actions with some help from Madison Avenue. They said, “Slowing global demand has left us with extra capacity that we can use to improve the reliability of our services. With these changes we can reduce schedule gaps and slidings, boost weekly coverage, and allow for more robust supply chain planning.”
- Negative: An unverified internal 2M memo said, “move bigger boats here, blank sail the hell out of shippers there, slow steam EVERYwhere!” Again, quite unverified. An equally unverified reply from a carrier executive said, “must we be maligned for running our business as best we can, jerk face?!” Fair ‘nuff.
The Far Least
- The National Retail Federation (NRF) has predicted the slowest import month in three years for February 2023. Woot! Keep bringing the great news, Planet Earth!
- At a more granular level, the NRF has predicted imports of 1.63 million TEUs for February—which is about 7 containers more than what danced through our ports in June 2020. It’s shocking that 1.63 million is 23% lower than one year ago!
- And, just in case global inflation, a looming housing crisis, civil unrest on four continents, a malevolent Mother Nature, and the fact that Barney branded “blanket pajamas” exist are not enough, the NRF has forecast double digit import declines for at least the first five months of 2023! Maybe the NRF is being so gloomy just so that Wall Street will be pleasantly surprised after Q1 and Q2…Maybe?
- Blank sailings for the last week in January could eclipse 60%, with an additional 40% forecast for the beginning of February. While this is directly connected to Chinese New Year (CNY) realities, these levels are high for even the one time a year Americans notice another nation’s holiday!
- What amplifies the impact of near-term blanks is that China has faced rolling Covid outbreaks and severe weather in recent weeks. This reduces available manpower (and womanpower, darn it) at factories, trucking companies, ports, and the REAL heroes of the global supply chain, forwarders!
- Take a deep breath, gentle reader—we are preparing to blow your mind. With labor shortages come longer vessel load and unload times. We all laughed at Los Angeles when she had over 100 vessels marooned off her beautiful beaches, but have you looked east from Ningbo and Shanghai lately…?
- 510 vessels are waiting to be processed for Ningbo and Shanghai combined! For now, we’ll ignore the fact that once Chinese laborers return to the job, they’ll have the harbor cleaned up in 18 minutes—that is a whole pile of vessels at anchor, gang!
US Port-Pourri
- While Norfolk has been asked to stand in the corner, all other US ports have moved into single digits for vessels waiting for a berth. In further good news, all US ports which are NOT the home of the US Navy are also trending down for this metric.
- While the congestion at Port Norfolk will soon clear, that part of Virginia is slowly sinking. Yes, Norfolk is plunging below sea level at about 4 millimeters per year. At about an inch every six years, we’ll keep our studious readers up to date on this every decade!
- With a gentle uptick in demand, rates to the US West Coast (USWC) and the rail ramps served by western ports have finally stabilized, with no real expectation of decreases before CNY.
- The US East Coast (USEC), on the other hand, continues to face wobbly demand, and we continue to witness rate erosion on a weekly basis. As it stands today, shippers can expect to pay below $1500 to the USWC and below $3000 to the USEC for their goods—which will never sell and will only accumulate mold in a warehouse! Just teasing!
- Vessels to the USWC are running at 95% full, while vessels to the USEC are struggling to hit the crucial 90% load factor levels.
