Featured Headlines:
SOE, What’s Up with the New USDA Regulations?
May Day for Certain 301 Tariff Exclusions
SOE, What’s Up with the New USDA Regulations?
- The U.S. Department of Agriculture (USDA) National Organic Program (NOP) previewed the Strengthening Organic Enforcement (SOE) final ruling in January—which marked the biggest update to USDA organic regulations since they were first implemented in 1990.
- Moreover, SOE serves to protect and further expand the growth in the USDA organics sector by strictly enforcing the regulations already in place, while also creating new requirements for organic parties.
- SOE is scheduled to go into effect in March 2023; however, the USDA is allowing a one-year phase-in-period for users to test the new process. It will become mandatory for all users in March 2024.
- Click here for more information about this announcement.
- Any questions about USDA or SOE? Ask one of our compliance experts!
May Day for Certain 301 Tariff Exclusions
- Last week, the Office of the US Trade Representative (USTR) announced that it would extend certain Section 301 tariff exclusions until May 15, 2023.
- The extension covers 81 medical products used to treat COVID-19 that were originally scheduled to expire at the end of February.
- The USTR will be accepting public comments from February 6, 2023 until March 7, 2023 on whether to further extend the exclusions for an additional six months. Importers can submit comments via the USTR Comments Portal.
- Click here to read the official Federal Register Notice (FR 63438), which includes a list of all products affected.
- If you have any questions related to Section 301 tariffs, contact us today!
Ocean Chassis Efficacy
- Somewhat quietly, the Intermodal Motor Carriers Conference of the American Trucking Association (ATA) has won a judgement allowing them to choose chassis more freely at marine ports and rail ramps… “Okay, so what, Shapiro?!”
- Here’s what: Historically, steamship lines have controlled the chassis-leasing business through interchange agreements—officially called “Uniform Intermodal Interchange and Facilities Access Agreements.” When this agreement is in play, trucking companies are directed to use certain chassis, certain chassis providers and to pay certain chassis tariffs for that privilege.
- Frankly speaking, the historical system may not be fair, but at least it is inefficient and expensive. It is unfair because it places too much liability on trucking companies while creating a pricing monopoly for chassis. Like most monopolies, it increases costs while decreasing competition…Yay!
- When you imagine forcing companies to obtain equipment farther away or to attempt to return equipment to a full yard, the inefficiencies and risk of demurrage and/or per diem is enough to enrage even the calmest of us in this delightful shipping business.
- The ATA sued the Ocean Carrier Equipment Management Association and others to secure freedom from the burdensome interchange system for the drayage industry. Interestingly, the large majority of ocean carriers no longer provide chassis as part of their offering—but they do control who provides them and what prices they may offer.
- “Thank you ever so much for bringing your customers to our store, but you or they must rent a cart to use here for a fee… and we keep the carts in the basement… of the building across the street. Oh, and for our customers, the carts are right here and cost 33% as much!” Thank you, steamship lines…! Thank you for loving us so much!
- No, but actually, thank you, ATA! This is a solid step towards fairness, reducing port congestion, and evening a long uneven playing field. Bravo!
Inspiring Firing?
- With so much recession worry, we find ourselves celebrating the fact that the US Bureau of Labor Statistics (BLS) announced that only 288,600 people in the American transportation industry lost their jobs in January. What?! How could this POSSIBLY be good news?… Wait for it, pushy reader!
- Okay, in January 2022, during what was considered a boon market, rather than today’s boondoggle, we lost 295,900 jobs. Seen in this light, 2023’s post-holiday seasonal purge was unexpectedly light—even if only 2.5% better.
- The courier and messenger sub-sectors took 77% of the job cuts, and this is in line with historical trends after the end of the Christmas season.
- BLS indicated that the trucking business had a seasonally adjusted gain of over 4,000 jobs, though they refused to show their complex formula for seasonality. When asked, their official spokesperson said with resounding certainty, “no.”
- The warehousing sector fared poorly compared to recent history after some 40,500 workers were let go—which total eclipses any previous January on record. A year ago, the sector lost only 15,900 jobs in January. With warehouses bursting at the seams, maybe they need fewer workers to simply watch all that inventory sitting idle?
Lay Off My New Trade Blues
- Most of you don’t know that Elvis majored in Global Economics at Harvard before jiving in those blue suede shoes! Okay, okay, but Elvis did at least finish high school.
- Let’s take a look at the broad trade trends for the US in 2022. With our relentless consumption of foreign goods, the US has had a trade deficit since 1976—when a new Honda Civic could be had for $2,000.
- One for the money: The total US trade deficit widened 12.2% in 2022 versus 2021 and now sits at $948 billion. And the merchandise trade deficit sits above $90 billion per month!
- Two for the show: On a more optimistic note, America’s surplus for services trade grew by nearly $140 billion in 2022, which kept the total deficit beneath that scary $1 trillion line. Services trade was dominated by US freight forwarders who charged their foreign offices and agents outrageous fees! (Oh, how we wish, gentle readers.)
- Three to get ready: Canada remains the largest goods trade partner of the US at almost $800 billion (14.9%); Mexico was a very close second at nearly $780 billion (14.7%); China maintained third place, with goods trade reaching $690 billion (13%).
- Go, China Cat, Go! The US trade deficit with China rose to a record $420 billion shortfall. Thus, our lust for China’s imports represents 44% of our global trade imbalance.
- Interestingly, the US trade deficit with the European Union (EU) (primarily Germany) actually shrank in 2022, though it remains above $200 billion (or roughly 21% of the total).
- The only change in the Top 10 trading partners for the US was Vietnam, which passed two other runners on the track to come in 8th place at an impressive $140 billion. Just five years ago, Vietnam was ranked 15th. Ten years ago, Vietnam didn’t crack the Top 25.
Turkish Ports’ Plight
- The Kahramanmaras earthquakes, measuring 7.8 and 7.6 on the Richter scale, damaged Iskenderun, a major Mediterranean Turkish port. Not only did the port endure a severe fire that set many containers ablaze, but Iskenderun port assets have also been rendered inoperable by severe structural damage. All port operations have ceased for now.
- Ceyhan—an oil pipeline gateway port—and Mersin—a major global container port—also closed for inspections after the massive quakes. Mersin was re-opened about 24 hours after the deadly February 6th calamity.
- Ocean carriers were quick to respond and have largely offered shippers the ability to alter routings already on the water on their way to Iskenderun. It appears that most lines will utilize Mersin as the most common alternate routing, though this will put acute pressure on landside warehousing and trucking operations.
- With the death toll over 21,000 and counting, our hearts and prayers go out to the people of Turkey and Syria.
Alliance Reliance Defiance
- When we look at ocean freight from Asia to the US, we would not be in compliance with this shipping pseudoscience without a focus on the alliance. To get us warmed up, here is quick reminder of the members of each alliance with their market share (by percentage):
- OCEAN Alliance (34%) – COSCO, Evergreen, CMA-CGM
- THE Alliance (27%) – ONE, Yang Ming, Hyundai, Hapag Lloyd
- 2M (24%) – MSC, Maersk, Zim
- Non-Alliance (14%) – Lots of smaller lines
- As an industry, we have begun to use 25% as a weekly benchmark for blank sailings; this is a capacity cull above 600,000 TEUs per month! A closer look, by alliance over the last 18 weeks, reveals that not all blankity-blank blanking rankings are equal—and some carriers and alliances may well need a spanking!
- For the US East Coast (USEC) and Gulf, we note the following void sailing levels (by alliance):
- THE – 42% … (ouch!)
- OCEAN – 28% … (eek!)
- 2M – 16% … (rats, we wanted to tease the big boys!)
- For Los Angeles/Long Beach (LA/LB), we note the following void sailing levels (by alliance):
- THE – 43% … (yowza!)
- 2M – 30% … (woah nellie!)
- OCEAN – 29% … (drat!)
- Intelligent readers like you must be wondering how our 25% benchmark can possibly make sense when you note the impressive capacity “theft” levels above. The answer lies in the combination of non-alliance carriers and alliance carriers’ independent services. Ohhhh, the tension builds in our story, noble scholars!
- When you isolate non-alliance based services, the blank sailing rate over the last 18 weeks to the US West Coast (USWC) is a slender 11%! What about the USEC and Gulf, Shapiro? Thanks for asking!… It is a respectable 14%—better than any single alliance’s performance.
- So, ocean carriers are less prone to cancelling voyages they run independently. Shouldn’t this be a big focus during annual contract negotiations?
- As MSC and Maersk eye their independent futures, we expect them to roll out new go-it-alone services. Does this foretell high rates of void sailings for 2M alliance sailings? Hmmm…
- Please pass the capacity management flavored bucket of popcorn!
