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Extension for Section 321 Pilot Program
Rejected LA Merch Gets the CBP Works
Expedited Licensing to the Rescue
Extension for Section 321 Pilot Program
- Take notes, folks…! US Customs and Border Protection (CBP) announced a two-year extension to the Section 321 pilot program. The program was originally slated for expiration come August 2023, but will now be extended until August 2025.
- Officials have reiterated that the pilot program will continue to test the transmission of certain data elements for Section 321 goods before arrival. CBP has also added optional data elements that can be transmitted.
- The pilot program is open to all importers that meet the eligibility requirements.
- Click here to view the official Federal Register Notice.
Rejected LA Merch Gets the CBP Works
- US Customs and Border Protection (CBP) recently issued new port procedures for the disposal of Food and Drug Administration (FDA) rejected merchandise arriving in Los Angeles (LA).
- All rejected merchandise must be exported back to origin or destroyed within 90 days of the refusal date and under CBP/FDA supervision during the disposition of cargo.
- Under the new process, the FDA will send the importer a Notice of FDA Action upon rejection and the applicable Centers of Excellence and Expertise (CEE) will issue a separate Form 4647 (Notice to Redeliver).
- It is the importer and/or custom broker’s obligation to coordinate the export or destruction of the rejected merchandise in question with the local FDA office and the closest CBP location to where the cargo will be exported/destroyed.
- Feel free to reach out to our compliance experts if you have any questions about the new procedures!
Expedited Licensing to the Rescue
- The Department of Commerce’s Bureau of Industry and Security (BIS) announced that it will expedite aid to non-profit organizations that operate independently of any government (NGOs) in Turkey and Syria.
- US officials are working to support the legitimate humanitarian needs of Syria’s impacted communities following the devastating earthquakes, despite substantial and necessary export controls on the Assad Regime.
- Turkey and Syria are subject to different licensing requirements under the Export Administration Regulations (EAR):
- Turkey, as a NATO ally member, does not require an export license on most aid items, but BIS will expedite any license applications it receives.
- Syria is subject to comprehensive export controls as part of a broad U.S. government sanctions program. All items, except for most food and medicine require a license for export and reexport to Syria.
- Shipments of aid and recovery-related items intended directly for the Syrian people will also be expedited by the BIS.
- For questions related to the above announcement, contact the BIS Foreign Policy Division via email or call (202) 482-4252.
- The Office of Foreign Assets Control (OFAC) has also issued guidance on relief for Turkey and Syria which can be found here.
Crystal Balling for Hauling
- According to many trucking executives and the band Chicago, US shippers and their transportation partners shouldn’t be too confident in claims of a second half rebound in 2023 freight demand. Indicators—such as manufacturing output, and sector-specific wholesale and retail inventories-to-sales ratios—show little sign of a speedy recovery in US domestic freight volumes. You’re the inspiration, trucking execs!
- Manufacturing output rose 1% in January from December, according to the Federal Reserve (FR), but that gain is from a revised lower base in December and didn’t reverse an overall decline. This is important because industrial goods account for about 58% of all US truck ton-miles, according to the US Census Bureau’s commodity flow survey (and, the band Chicago). You’re the meaning in my life, FR, but focus on meaningful stats!
- Despite better-than-expected factory output in January, the manufacturing spigot that releases shipping demand simply isn’t flowing fast enough, and retail inventories remain stubbornly high (errrrrr… like the band Chicago?). No one needs you more than I need you, manufacturing!
- On the import side, the National Retail Federation (NRF) believes US imports through the first half of 2023 will fall almost 20% from the same period last year, as importers lower those inventories and consumers potentially cut spending on goods in a slowing economy (including Chicago LPs?). You bring feeling to my life, imports!
- The seasonally adjusted retail inventories-to-sales ratio in January was 1.37, compared with 1.29 last year. Interestingly, that level was 1.42 in December 2019, according to data released by the US Census Bureau. So, why is EVERYBODY and the band Chicago still talking about high inventories when levels are below 2019? Always on my mind, in my heart, inventories-to-sales ratios!
Air Cargo Compass
- German labor union, Ver.di, coordinated an airport labor walk-out late last week which essentially knocked Lufthansa out of business for a day, which then created scheduling chaos for a week. 1,300 flights were canceled with over 100,000 passengers delayed.
- As you might expect, German ownership pointed out that the strike would slow down and unnecessarily complicate aid shipments to earthquake-devastated Syria and Turkey.
- As raging inflation diminishes purchasing power in Europe, we have witnessed a greatly increasing number and frequency of labor strikes. From air traffic controllers in Spain to ALL workers in France (angered over a higher retirement age), back to Germany where Ver.di is expected to organize more actions (inactions?), the air cargo environment for the European Union (EU) is shaky at best.
- Globally, we note that, while still down 16% year-over-year (YoY), industry chargeable weight is up over 6% in the last three weeks alone.
- As we guessed (because we are smart as a whip, duh), the global average price for airfreight did sink below $3.00 for the first time since 2020. However, that average has increased for four straight weeks reflecting warming demand.
- When we place China to US air export rate trends under our powerful intellectual microscope, we note 25% rate increases from Hong Kong and Shenzhen in the last 7 days. Shanghai, too, has witnessed a substantial increase—though a more modest 13%.
- Some like it hot (like Marilyn Monroe), but we are going with warm to describe today’s air market…and a warming air market is a positive economic sign, say we!
EU Export Review
- Bloomberg has been closely watching the European Union (EU), intelligent readers. Driven largely by robust cross-border trade, the euro-area average export growth was a cool 30% compared to 2019 in 2022. This figure puts the US and even China to shame, but is it sustainable?
- Welcome to the concept of “revenge spending!” The concept hopes that you will enjoy a cup of joe while we explore and evaluate…conceptually.
- We first note that foreign travel scores economically as “services trade,” and we follow that up by noting that Greece’s “exports” grew over 60% compared to pre-pandemic. Hmmm…60%?!
- Spain and Italy have also kicked some economic badonkadonk over the same time period; but growth has been much more tepid for Germany and France. Europe’s two largest economies have shown export growth at about half the EU levels in total.
- This takes us back to our new imaginary bestie: revenge spending. The idea is that when people are restricted from travel, entertainment, or experiences for a long period of time, they will “get even” and spend freely (wildly?) when those restrictions are lifted. If you have ever been to Chicago in the Spring, you have seen some rabid revenge spending!
- Well, at least France has some warm beaches and southern sun, right? Right, but France has been far more exposed to supply chain bottlenecks that affect manufacturing and cargo distribution. As you intelligent readers know, a tourist need not wait for imports of feet, legs, and other body parts before exporting themselves to lovely Greece!
- It feels more than a little likely that Europe’s export successes have been aided by some powerful revenge spending. In many ways, a quick boost in tourism is hardly a bad thing. The question sits on the sustainability side with a side order of consumer debt concerns.
- Another future factor for EU exports is “the Russia question.” Most EU countries had at least steady trade with Russia, and sanctions on Russian oil have led to retaliations from the world’s largest country by area.
- Total container handling at Rotterdam—Europe’s most active seaport—was down more than 5% in 2022, while total port activity was down only a fraction due to non-containerized energy imports. Thanks to less Russian trade, with the EU and the world, Rotterdam expects further volume and activity declines for 2023.
The Mega Boat Bloat
- Alphaliner has evaluated the order books of all three major alliances, plus Zim and Wan Hai Lines. And, it’s true! After a decadent shopping spree at all the world’s most glamorous shipbuilding yards, the steamship industry will be receiving almost 90 vessels of 7,000 TEU capacity or larger this year.
- The megamax segment—gigantic beauties above 24,000 TEUs—represents over 33% of those 90 box ships arriving in boxes with bows at the front doors of proud carrier parents. Wait, is our dominant metaphor a shopping spree or parental fertility…?!
- Not surprisingly, MSC leads the way with an impressive roster of new buildings. The Swiss behemoth purchased 45% of all megamax bundles of joy and nearly 40% of the neo-panmax (13,000-15,000 TEU class) little (giant) darlings!
- When compared to any single ocean carrier, MSC’s 2023 orderbook of larger vessels is 313% larger, at minimum. It just isn’t close, sports fans!
- Drewry, which has always gossiped negatively about Alphaliner during tea parties, claims that just 60% of yesterday’s spending sprees will hit the seas in ’23, if you please. As you can hear, Drewry also fancies itself a “rhymin’, chimin’ Titan in their prime’n.”
- Since current supply is estimated to be at least 20% more than demand, how in the world will the industry deal with these 90 new purchases? Great question, Shapiro!
- Carriers have already idled nearly 7% of their global fleet when measured by capacity. This involves either floating around with a tiny crew off Singapore looking for mermaids or extended repair and maintenance spa sessions at a shipyard.
- After the lowest 24-month scrapping activity on record, older, less-compliant vessels will increasingly be destroyed for scrap metal, though the demand for scrap is about as iffy as the global demand for container slots. Oh, the irony!
- For our evaluation of future blank sailing patterns, we turn to Bachman-Turner Overdrive (BTO), and they say:
- “B-b-b-baby, you just ain’t seen n-n-nothin’ yet; Here’s something that you never gonna forget; B-b-b-baby, you just ain’t seen n-n-nothin’ yet.”
- Bravo, BTO! Industry experts, like BTO, believe that the ocean carriers should have upped their blank sailing levels much higher and much sooner before allowing rates to sink below break-even. We won’t be surprised to see 35-40% of capacity blanked in early 2023.
TPM Brain Stem
- After red-eye flights back East, our crew has vowed to NEVER attend TPM again… never, ever, ever again, in fact. But, we do have some gossip from this year!
- Look out for SHORT contracts! Why would an ocean carrier want to lock-in long-terms rates below cost? Well, they don’t! We’ve seen some two and three-month offerings, which is highly unusual, but a sign of the times.
- Not one person thinks that demand will meet supply in the next three years. Yes, three years. Don’t let people let you forget that over-supply is a real problem for ocean carriers and rates for years to come.
- Maersk and CMA sitting in a tree, k-i-s-s-i-n-g! Many people feel that these two European giants will find their way to Vessel Sharing Agreements (VSAs) in the short term and maybe more in the future.
- Free time is back on the table, gang.
- Could the Ocean Alliance slowly disintegrate? Lars Jenson, the intellectual stud who predicted the 2M break-up, says, “yes.” Essentially, COSCO, with her somewhat gaudy order book, needs to gain market share and has emphasized standalone growth already. Does tension between China and Taiwan leak into relations between Evergreen and COSCO?
- Historically, carriers point the finger at shippers after a market collapse. After two and half years of historic profits, most ocean carrier executives have struck a somewhat humble pose as they evaluate the rubble of today’s rate landscape.
