Featured Headlines:
Rate Tsunami Strikes Indian Sub
West Coast Whirlwind: Import Surge and Improved Dwell Times
FMC Gives Import to Deal Making for Exporters
US Spins Yet Another Lacey Act Webinar
OFAC…Officials to Extend Statute of Limitations!
Bangladeshi Blues: Air Freight Frenzy & Demurrage Dilemmas
Rail Strike Ripple: US-Canadian Freight Shift
Senate Moves to Fuel DOT's Future
Harbor Hustle: WRDA Set to Boost Baltimore and Oakland Ports
Rate Tsunami Strikes Indian Sub
- It was in 2004 that an undersea 9.1 earthquake off of Sumatra caused a massive tsunami that took almost ¼ million lives and cost the region over $150B. We mention this because comparing today’s ocean freight market to a tsunami is no laughing matter for the victims of that 14-country tragedy. For the rest of us, the metaphor feels apt…!
- Container rates out of India have surged, with prices on major routes increasing by 200-300% over the last six weeks with more shippers slamming PSS notices on the horizon.
- Just as US shippers see container rates from greater Asia ebb well below $10,000, all we see from India is flow, flow, flow! Since this wave has nothing to do with the tide or earthquakes, what’s churning the Indian Ocean this time around?
- Well, if tsunamis are rare in India, cyclones are not! From April-November, one packs a worthlessly flimsy umbrella and prepares for violent weather and monsoon season. While we have had but one named cyclone, Remal—which graced us at the end of May—that storm killed nearly 100 people and caused about $8B in damage. Yowza!
- Yet, the weather is not the real culprit here. No, it is much more about rebels in Yemen telling the world to “pound Remal.” Yes, as it turns out, Remal means sand in Arabic. And my, how the Houthis have told us all to pound sand!
- In English, since 1857 according to Oxford, pounding sand indicates either a highly menial task or a hopelessly stupid person. Today, it seems to indicate more of the type of bird that flies while driving on the interstate or trying to park in a crowded city or airport!
- As one considers the Indian-Subcontinent, the large majority of exports and imports come from North America and Europe. And the large majority of this large majority prefer to float on through the Suez for efficient/reliable transits, fuel usage, and fully engaged labor.
- In the US, we estimate that a bit more than 10% of our imports are directly affected by shipping around the Cape of Good Hope; in India that number is closer to 90%.
- Thus, nearly all of the vessels are in the wrong places at the wrong times, and the result is the arrival of our dear friend, congestion. Port congestion today is more like a reverse tsunami. Rather than all boats arriving at once on a 100-foot unsurfable nightmare, all vessels are late as they bunch together awkwardly as they make their way to Mumbai, Cochin, or Chennai.
- Adding to the dislocated assets chaos is very high re-stocking demand from Europe and North America. So, as effective capacity wanes with longer transits, total demand is waxing… supply is ebbing just as demand is flowing.
- India is a beautiful, exotic land with great ambitions to surpass China as the “world’s factory” one day… but, she has much work to do in the realms of transportation and business infrastructure. This leads to what could be called shipment bunching. With demand quaking, production has become less methodical, predictable, and steady.
- Fearing a port strike in the East, we Americans want our holiday goods—and we want them now! Europeans, having witnessed unreliable transits for half a year while battling their own waves of port congestion, are ordering early and often!
- Just as one rides out a cyclone or runs for the hills during a tsunami, shippers are advised to ship only urgent India cargo during August as we hope to see the prompt ebb of current rates and supply chain snags that we just witnessed from Asia. Hang in there, gang!
West Coast Whirlwind: Import Surge and Improved Dwell Times
- Despite strong volume growth… wait, let’s quantify this! The first half of 2024 is the volume bronze medalist for any six months in history for US imports…like ever and stuff! Without Covid, 2024 would win the gold, sports fans.
- Still, USWC major gateways, including LA LGB Oakland and Seattle, created improved rail container dwell times in June. Impressive!
- (Tacoma, please go stand in the corner since you are all congested and still have longer rail dwell times… despite the expensive tutor we hired for you!)
- Before we make Tacoma cry, please note that imports from Asia, up 12% in June nationally, were up almost 23% for Tacoma and Seattle. This connects to Canadian rail labor concerns that tempered Vancouver growth a bit (keep reading, scholars).
- Strong import volumes are driven by front-loading of fall and holiday merchandise and diversions due to potential US East Coast labor strikes.
- Ports have collaborated closely with BNSF and Union Pacific railroads, sharing advance shipment data to manage import spikes. BNSF set a record for direct ship-to-train loadings, responding with increased railcars, locomotives, and staffing.
- Los Angeles and Long Beach are operating at about 75-80% capacity, with sufficient container handling capacity for the peak season. The Port of Oakland and other ports report being well-prepared for additional cargo (just not Tacoma, sniff sniff).
- Ten transpacific services were launched or reinstated to the West Coast, with 16% more vessel arrivals expected at Los Angeles-Long Beach in August, for example.
- Ports and rail networks are optimistic about managing the continued strong import growth expected during the peak shipping season, projecting a normal seasonal dip in volumes in November and December for added buffer capacity.
FMC Gives Import to Deal Making for Exporters
- Once in a long while, a law or policy just sounds too cool for school. Enter the “Unreasonable Refusal to Deal” ruling from the FMC! While the FMC has been hogging the headlines for importers as part of OSRA22, let’s take a closer look at the FMC’s proposed exporter protections:
- Documenting Policies: Ocean carriers must annually file a “documented export policy” with the FMC, detailing pricing strategies, services, routes, and equipment availability to ensure transparency and fairness.
- OSRA-22 Influence: These rules arise from the Ocean Shipping Reform Act of 2022, addressing complaints that carriers prioritize empty containers for higher-paying import cargo over loaded export cargo.
- Advance Notice Required: The FMC mandates that “blank sailings” or sudden schedule changes must come with sufficient advance notice to allow shippers to adjust their plans, preventing last-minute disruptions.
- Cut-and-Run Scrutiny: The FMC targets early ship departures that leave export cargo behind, holding vessel operators accountable for scheduling adequate loading times at ports.
- Fair Pricing Enforcement: Quotes for outbound export services that are “far above current market rates” can be deemed unreasonable refusals to handle exports, ensuring fair access to shipping services.
- Safety and Operational Exceptions: Carriers can refuse exports for safety and operational reasons but will face scrutiny if they misuse “sweeper” vessels to avoid handling exports.
- Pending Approval: While the export policy rule awaits approval from the US Office of Management and Budget, other rules will take effect 60 days after publication, marking significant regulatory changes for the shipping industry.
CPSC on Track with New Tool
- The Consumer Product Safety Commission (CPSC) recently unveiled a new tool to assist the trade community with CPSC related import shipments.
- This is great news for importers, as they will no longer need to e-mail the CPSC for updates on their shipments.
- All that’s needed is an entry number for tracking!
- For more information, please visit the CPSC Import Shipment Tracking Tool portal.
US Spins Yet Another Lacey Act Webinar
- Good news for Spiderman enthusiasts! US Customs and Border Protection’s (CBP) Office of Trade and the US Department of Agriculture (USDA) are teaming up to “spin” a webinar providing an overview of the Lacey Act.
- During the webinar, the agencies will review the import requirements for plants and plant products, as well as cover updates on the Phase VII implementation.
- The webinar will take place on Wednesday, August 21, 2024 at 2PM (EST). To register, please click here.
- For additional information, please refer to CSMS # 61527040.
OFAC…Officials to Extend Statute of Limitations!
- US officials have released guidance to address questions raised by recent legislation that extended the statute of limitations for violations of certain sanctions administered by the Office of Foreign Assets Control (OFAC).
- On April 24, 2024, the President signed into law the 21st Century Peace through Strength Act, Pub. L. No. 118-50, div. D (the “Act”). Section 3111 of the Act extends the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) or the Trading with the Enemy Act (TWEA) from five to ten years.
- As such, if a violation was recorded after April 24, 2019, OFAC may now commence an enforcement action for civil violations of IEEPA or TWEA-based sanctions prohibitions within 10 years of the latest date of the violation.
- To match the new statute of limitations period, OFAC anticipates publishing an interim final rule, which will include an opportunity for the public to submit related comments.
- OFAC anticipates that a 10-year recordkeeping requirement would become effective six months after publication of the interim final rule.
- More information can be found in Guidance on Extension of Statute of Limitations released on July 22, 2024.
Bangladeshi Blues: Air Freight Frenzy & Demurrage Dilemmas
- Before we take a look at the logistics realities, let’s have a look at the sociopolitical landscape in Bangladesh. On June 5th, Bangladesh’s High Court reinstated a quota system that automatically reserves 30% of government jobs for the descendants of veterans of the 1971 War of Independence with Pakistan.
- Peaceful protests, dominated by college students, began immediately as much of the youth of Bangladesh considers the quota system discriminatory. 40% of Bangladeshis are under the age of 21 (compared to under 30% in the USA, for example).
- After highly violent responses from Bangladeshi police and military and an outrageous insult from Prime Minister Hasina Wajid, who thought it was prudent to label all protesters “razakars” (which essentially means “traitors”), protests have conflagrated into deadly clashes—leading to over 200 student deaths, a media blackout, and an internet shutdown.
- What started as a conflict over a quota system has shifted to calls for murder investigations and demands for the resignation of officials, including the Prime Minister. With only 60% of children enrolled in primary schools, an average income of 4% of US levels, and what now amounts to a total distrust in government, it is easy to see how this bonfire has been fed and fed with the dry tinder of revolution.
- Just as local infrastructure is at its shakiest, demand for exports is cresting (a first cousin of what we noted for India in our feature article).
- Now, apparel shippers in Bangladesh are turning to airfreight as delays at Chittagong port threaten purchase orders; shippers are seeing up to 25% higher logistics expenses.
- Delays at the port are causing significant disruptions in the supply chain, impacting delivery timelines and customer satisfaction.
- Containers are piling up in Chittagong, prompting Bangladesh to consider a demurrage waiver to alleviate the burden on shippers. Local exporters have been heard muttering, “our ocean transits and costs may be high, our airfreight expenses may be higher, but at least we have demurrage and storage costs that are spiraling out of control!”
- Airfreight rates have surged as demand spikes, putting additional strain on the already tight budgets of Bangladeshi exporters.
- It’s a waiting game for now, as stakeholders await social calming, the government’s decision to intervene on storage costs, and overall smoother sailing ahead.
Rail Strike Ripple: US-Canadian Freight Shift
- The British Columbia Maritime Employers Association (BCMEA) is duking it out with the Local 514 of the International Longshore and Warehouse Union (ILWU) over automation and staffing connected to DP World’s Central terminal in Vancouver.
- While the finger pointing details may be yawn-inducing, the consequences are real when coupled with Canadian rail labor concerns. A double whammy!
- The threat of a Canada-wide rail strike has diverted intermodal rail freight to the US, impacting Canadian National Railway (CN) significantly–particularly in international intermodal traffic.
- Following a Teamsters Canada Rail Conference (TCRC) strike vote in late May, CN saw a 17% drop in intermodal volume from May to July, with weekly loads decreasing from 48,403 to 41,800.
- This comes after a great start to 2024 for intermodal rail in Canada: a 6% year-over-year (YoY) volume increase through May and a 19% increase in international intermodal revenue!
- CN had to add trains to its Vancouver corridor due to high demand, even as the threat of strike diverted freight away from Canadian ports. This calls into question the overall efficiency of “canucking” port operations connecting to “canucking” rail logistics. (Duh!)
- CN’s performance has been highly sensitive to labor uncertainties, with ocean lines and domestic shippers implementing contingency plans like port diversions and modal shifts.
- A potential strike was delayed by the Canadian Industrial Relations Board (CIRB), which is investigating whether a strike would affect essential services; a decision is expected around August 9.
- CN hopes for labor certainty by the end of August, anticipating a gradual return of international business to Canadian ports post-resolution. Even if this resolves constructively, we still must keep an eye on Local 514 of the ILWU!
Senate Moves to Fuel DOT's Future
- A Senate committee advanced a bipartisan bill for fiscal 2025 funding of the U.S. Department of Transportation (DOT), including $964.5 million for the Federal Motor Carrier Safety Administration (FMCSA).
- The bill focuses on promoting safe commercial motor vehicle operations and reducing accidents through various initiatives.
- Trucking policy highlights include blocking electronic logging devices for livestock/insect carriers, banning inward-facing cameras for apprenticeships, and reviewing guidelines against predatory towing and safety systems for autonomous trucks.
- Funding allocations: $63.1 billion for highways, $22 billion for aviation, $17 billion for transit, $3.4 billion for railroads, and $1.2 billion for highway safety.
- The bill also funds housing initiatives to address affordability, homelessness, and native housing needs in the transportation sector.
- The American Trucking Associations (ATA) praised the bill, highlighting strong support for truck parking and cargo theft prevention.
- A House committee passed a similar bill, allocating $200 million for truck parking. Floor votes for both bills are pending, with an October 1 deadline to avoid a federal shutdown.
Harbor Hustle: WRDA Set to Boost Baltimore and Oakland Ports
- The Water Resources Development Act (WRDA) passed the House with a 359 to 13 vote, authorizing $4.8 billion in projects—including widening and deepening Baltimore’s Seagirt Loop Channel and Oakland’s turning basin.
- The Senate’s Environmental and Public Works Committee has approved its version, which awaits a final vote before conferencing with the House to finalize the bill for President Biden’s signature.
- Key projects include improving Baltimore’s harbor at an estimated cost of $63.9 million and Oakland’s harbor at nearly $609 million, aiming to enhance vessel navigation and safety while reducing emissions.
- WRDA projects focus mainly on storm and flood mitigation and inland waterway improvements, marking ongoing infrastructure development.
- Congress has addressed water resources legislation every two years since 2014, ensuring continuous upgrades and support for port infrastructure.
