Featured Headlines:
Commerce Introduces Changes to Voluntary Self-Disclosure Regulations
USTR “Wafering” on Decision to Increase Certain 301 Tariffs?
US Signs Customs Agreement with Uzbekistan? …Youz Bet They Can!
Section 232 Duties on Certain Aluminum Imports from Mexico
Evergreen Seeing Red for 2025 Rates
De Minimis Abuse Hits De Maximus
Trucking Troubles: Workforce Woes & Capacity Crunches
Strike this from the Record
- With a strike by the International Longshoremen’s Association (ILA) looking more likely by the minute (second?), shippers and carriers are scrambling to avoid major bottlenecks. Are they really?! Do shippers and carriers have the same goals?!
- Many US ports are opening after hours and on weekends to help shippers retrieve their cargo ahead of a possible strike. (This is a little bit more than a little bit like bringing in your garden furniture, umbrellas, frisbees, and pets (!!) before a hurricane, Helene!)
- Anyway, the Georgia Ports Authority (GPA) will keep Savannah’s Garden City Terminal open for extra hours, including Saturday operations and a rare Sunday full day on September 29th. (Suppressed joke about Savannah’s proud Irish-Catholic heritage!)
- The Port of Houston is pushing shippers to pick up imports as quickly as possible, with terminal gates staying open until 7 PM whenever possible.
- Ports more than a little like Norfolk and Houston are waiving import dwell fees during the stoppage, so at least there’s some relief on that front. What a smart idea… seriously!
- GPA has advised that export containers, including reefers, need to make it onto a ship by September 30. After that, if the port closes, refrigerated containers will be left unmonitored. Spoilage alert! Better clear out those reefer boxes while you can!
- Ocean carriers are starting to roll out fees to cover the disruption. Hapag-Lloyd announced a $1,000-per-TEU “work disruption surcharge” for non-Asia exports headed to East and Gulf Coast ports, effective Oct. 18. Meanwhile, CMA CGM has tacked on a “local port charge” of $1,500 per TEU, effective Oct. 11, for cargo destined for those same ports.
- So, let’s stop for a moment, here. Ocean carriers, unable to reach a labor agreement at their terminals, are now imposing shipper fees to cover that cost! TOTALLY fair!
- In other news, Cosco Shipping has stopped accepting new export bookings from inland US locations, while Hapag-Lloyd is speeding up vessels and prioritizing import discharge to avoid a pile-up right before the strike hits.
- Be prepared for additional fees if your cargo is caught in the crosshairs of the strike. Check in with your beloved forwarder to understand how these new charges might affect your costs, and brace for impact and potential delays.
The Strike’s Air Spike
- As American ocean shippers toss lucky horseshoes in verdant fields of four-leaf clovers with rabbit’s feet in pocket, hoping beyond hope for an ILA resolution, the air cargo industry is buckling up and throttling their engines for a cargo surge.
- Let’s take a quick look at airline cargo results YTD (year-to-date) and BTDS (before-the-damn-strike):
- Demand has increased year-over-year for all major air trade lanes
- Asia-Pacific and Europe are at the head of the class with 16%+ growth
- E-commerce now sits at 20% of total global air cargo volume
- Major ocean supply chain challenges, most notably the avoidance of the Suez Canal, has already tripled ocean cargo conversions to air year-over-year
- Because of robust passenger traffic, airfreight rates have been quite stable despite the demand uptick; supply has risen at a similar rate (pun intended)
- Related to supply, air cargo load factors sit at an average of only 58% in 2024
- This last bullet gives us a slim glimmer of hope that ocean conversions to air, if done in moderation, may not cost a kilo of pure gold per kilo in the event of a prolonged strike. 42% average available capacity offers at least some space to grow.
- Also, the airlines will almost certainly deploy a greater number of freighters, develop creative deferred air solutions, and expand the use of sea-air routings.
- While cargo (re)designs from China can take advantage of some of the largest gateway airports on Earth, many origins do not have that advantage. Expect to read about air-sea cargo slinging through Singapore, Dubai, and the usual suspect airports in Europe!
- If we choose to be realistic (which isn’t any fun), it will not take long at all for extreme air cargo load factors to amplify air pricing by multiples of 100%, and ALL air cargo flows are too expensive for a large majority of low-margin ocean shippers.
- If we had more courage, this is where we would mock the notion that higher tariffs and supply chain snarls NEVER EVER lead to inflation! (NEVER EVER!!)
Industry Emissions Pushback
- The race to achieve zero-emissions at the largest US port complex has hit some bumps in the road, echoing similar discourse around the world.
- Shippers, transportation groups, and the International Longshore and Warehouse Union (ILWU) are pushing back against new air emissions regulations they say could cap cargo growth and disrupt operations.
- A coalition of 200 port stakeholders sent a letter to the mayors of Los Angeles and Long Beach urging them to halt the South Coast Air Quality Management District’s (AQMD) proposed Port Independent Source Rule (ISR).
- Without the technology in place to support a zero-emission environment, the fear is that port operations will face caps on cargo volumes—reducing the number of ships, trucks, and rail movements into and out of the LA-Long Beach port complex on their way to the broader Southern California logistics network.
- The Pacific Merchant Shipping Association (PMSA) echoed these concerns, saying the proposed Port ISR could punish operators who’ve already slashed diesel pollution by 90%.
- The focus, they argue, should be on further developing the infrastructure needed to sustain long-term emissions reductions, rather than implementing new, potentially duplicative regulations.
- From what we’ve read, shippers, truckers, and terminals are not hoping to leave their black carbon footprints all over SoCal’s white carpet; they just want the pace of change to be sustainable and realistic!
- For shippers and transportation professionals, now’s the time to stay ahead of potential changes. Keep an eye on how the regulatory environment shifts and prepare for possible disruptions to cargo flows in 2025.
- For more information, reach out to [email protected].
Commerce Introduces Changes to Voluntary Self-Disclosure Regulations
- The Bureau of Industry and Security (BIS) has issued a final rule to amend voluntary self-disclosure rules, penalty determinations, process guidelines and the announcement of the First Ever Chief of Corporate Enforcement.
- These changes incorporate previously announced policies into the Export Administration Regulations (EAR)—such as those announced in the April 2023 memo—and are effective September 16, 2024. The Chief’s identity is a secret!
- The following is a non-exhaustive list of the areas covered by this rule:
- Details how OEE will process VSDs in a dual-track manner, with VSDs involving minor or technical violations being resolved within 60 days either by no-action letter or warning letter, and the assignment of an OEE agent and BIS Office of Chief Counsel enforcement attorney for potentially significant violations.
- Adds a streamlined submission process for VSDs involving minor or technical violations, including an abbreviated narrative and the recommendation to bundle multiple minor or technical violations into one overarching quarterly submission.
- Makes clear that an entity’s deliberate decision not to disclose a significant violation will be considered an aggravating factor when OEE determines what administrative penalties, if any, will be sought.
- Clarifies that any person, not just a party submitting a VSD, may notify the Director of OEE that a violation has occurred and then request permission from the Office of Exporter Services to return previously unlawful exports to the United States.
- Revises the BIS Penalty Guidelines to give OEE increased discretion to determine penalties that appropriately reflect the individual circumstances of violations, while maintaining OEE’s ability to adjust penalties (up or down) within the statutory limits to reflect the applicable factors for administrative action set forth in the BIS Penalty Guidelines.
- Replaces the penalty cap of $125,000 for non-egregious VSD cases with a cap of half of the transaction value.
- Replaces the penalty cap of $250,000 or schedule amount for non-egregious cases not initiated by a VSD and replaced it with a cap of the full transaction value.
- Formalizes non-monetary resolutions as an enforcement response for cases that involve non-egregious conduct but rise above the level of cases warranting a warning letter or no-action letter.
- Amends Aggravating Factor C to include the enabling of human rights abuses as a specific consideration when BIS assesses the potential impact of a violation on U.S. foreign policy objectives.
- Amends General Factor H to make clear that disclosures of conduct by others that lead to an enforcement remedy count as exceptional cooperation.
- You can either subject yourself to a quiz of these 10 bullet points, or you can read the full list of changes in the official BIS press release here!.
USTR “Wafering” on Decision to Increase Certain 301 Tariffs?
- On September 19, 2024, the US Trade Representative (USTR) announced that it will ask the public to submit comments as to whether or not it should increase Section 301 tariffs to 25% on certain tungsten products; and to 50% on wafers and polysilicon products.
- The following is a list of specific items (and HTS codes) covered by this review:
- Tungsten Products:
- 8101.94.00 (Tungsten, unwrought (including bars and rods obtained simply by sintering)).
- 8101.99.10 (Tungsten bars and rods (other than those obtained simply by sintering), profiles, plates, sheets, strips and foils)).
- 8101.99.80 (Tungsten, articles nesoi).
- Wafers/Polysilicon Products:
- 2804.61.00 (Silicon containing by weight not less than 99.99 percent of silicon).
- 3818.00.00 (Chemical elements doped for use in electronics, in the form of discs, wafers etc., chemical compounds doped for electronic use).
- Tungsten Products:
- USTR officials are specifically looking for comments related to:
- The extent to which the proposed modifications would enhance the effectiveness of the tariff actions in obtaining the elimination of or in counteracting China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
- The likely effects of the proposed modification on the U.S. economy, including consumers.
- Public comments can be submitted via the USTR Comments Portal beginning September 23, 2024 through October 22, 2024.
- For additional information, please refer to the official Federal Register Notice (2024-21773).
US Signs Customs Agreement with Uzbekistan? …Youz Bet They Can!
- The United States signed a Customs Mutual Assistance Agreement (CMAA) with the Republic of Uzbekistan in Washington DC to formalize a mutual effort to strengthen Customs support and law enforcement relationships between the two governments.
- Signed on September 13, 2024, the CMAA will allow the US and Uzbekistan to exchange detailed trade information, thus strengthening the collaboration between the two countries.
- CMAAs are bilateral agreements between the US and its international partners that are enforced by their respective Customs administrations.
- They provide the legal framework for the exchange of information and evidence to assist countries in the enforcement of Customs laws–such as duty evasion, trafficking, proliferation, money laundering and terrorism-related activities.
- In the US, implementation is overseen by Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE) agents.
- This CMAA reflects the commitment to a continued relationship and collaboration with Customs authorities on a wide range of issues—such as securing the countries’ borders.
Section 232 Duties on Certain Aluminum Imports from Mexico
- On July 10, 2024, the United States imposed Proclamation 10783—Adjusting Imports of Steel Into the United States (89 FR 57347)—an additional 25% ad valorem tariff on certain imported steel articles and derivative steel articles that are products of Mexico.
- Officials recently released more details to help provide guidance for the trade community; these include the following clarifications:
- Any products melted and poured in a country other than Mexico, Canada, or the United States are subject to the additional ad valorem rate (25%);
- These articles will be subject to a melt and pour requirement; and
- A steel mill certificate will also be required.
- For further information, please see CSMS # 62095799.
Evergreen Seeing Red for 2025 Rates
- As if we didn’t have enough on our logistics plate—Evergreen just announced they’ll be raising transpacific contract rates for 2025. The joy!
- Why? Blame it on the looming dockers’ strike at US East Coast ports and a substantially drastic dose of geopolitical turbulence.
- Evergreen’s president, Wu Kuang Hui, isn’t mincing words: there’s a “very high” chance that the International Longshoremen’s Association strike will hit on October 1. Not only will this impact US East Coast ports, but Mr. Wu warns of worldwide ripple effects on global supply chains. That means you too, Madagascar!
- Evergreen is bracing for a hike in operational costs, which means—you guessed it—higher transpacific contract rates.
- Despite a dip in spot market freight rates recently, Evergreen sees stable demand and an earlier-than-usual Lunar New Year adding (bunker) fuel to the rate hike hype.
- Additionally, Evergreen expects continued congestion at North American and Asian ports and won’t be sending vessels through the Red Sea until the Middle East stabilizes—whatever that means in 2024 and 2025 (and beyond?)!
De Minimis Abuse Hits De Maximus
- The surge in de minimis shipments (from 140 million to over one billion in the last decade) is making it harder to enforce US trade, health, and safety laws.
- Many shipments, especially from China, take advantage of this exemption to bypass duties and safety checks. Quick reminder: Broadly speaking, shipments worth $800 or less do not need a formal entry, well any entry at all (!), to enter the commerce of the US of A!
- Most of these low-value, duty-free shipments consist of products like textiles and apparel though e-commerce as a broader category is the Big Kahuna in this fishing spot!
- The Administration plans to issue an Administrative Action excluding de minimis shipments of products covered by tariffs under Sections 201, 301, and 232, targeting e-commerce platforms that exploit the exemption.
- Importers will be required to submit Certificates of Compliance for consumer products, even for de minimis shipments, to prevent unsafe goods from entering the US market.
- The Administration urges Congress to pass comprehensive reforms, including excluding import-sensitive products like textiles from the de minimis exemption and enhancing tracking of shipments linked to illicit drugs.
- Clearly, while this change was likely driven, in part, out of concern for intellectual property rights and consumer safety, this update was the de maximus of inspiring for some and the de minimis of depressing for others!
Trucking Troubles: Workforce Woes & Capacity Crunches
- It seems the US trucking industry’s workforce may be riding a smaller wave than we thought. New data from the US Department of Labor suggests we might be in for a tighter trucking market when demand surges.
- A 2.1% workforce drop? Yep, that’s the story quarterly data is telling us. Trucking employment at the end of Q1 was 2.1% lower than monthly payroll data indicated, and experts like Michigan State’s Jason Miller think that gap could grow.
- Truckload carriers have been shedding trucks since 2022, with the Truckload Capacity Index dropping a whopping 16.3 percentage points. Even the big players are feeling the pinch, placing fewer trucks in the game.
- The big dogs in the trucking industry are “slow-rolling” their hiring, keeping a lean roster of drivers they trust to handle the next demand spike.
- Translation: capacity will tighten fast when freight demand picks up, and truck prices might spike faster than a caffeine-fueled cross-country haul.
Railroad to the Rescue?
- With the potential for an International Longshoremen’s Association (ILA) strike looming on Oct. 1, the big players in the US railroad industry—CSX and Norfolk Southern—are not sweating it.
- They’ve got their contingency plans on track (pun intended) to handle any East and Gulf Coast port disruptions.
- Both railroads say they’ve been training for this moment for a while, managing cargo from West Coast ports via their intermodal hubs in Chicago and Memphis. So, even if things shift West, it just means longer (and more profitable) hauls for them.
- While 150,000 domestic containers make their way from Southern California to Atlanta each year, only about 25,000 ocean boxes take that same ride. Even fewer ocean containers—just 5,000—make the trek to New Jersey or Pennsylvania compared to the 160,000 domestic loads. Can you say “buy stock in transload companies on the West Coast?!” No, we’re serious, say it!
- The West-to-Midwest route is busy, with over 225,000 ocean shipments moving annually from the West Coast to cities like Cincinnati, Cleveland, and Detroit. CSX and Norfolk Southern are ready to play a key role in that final stretch from Chicago to your distribution centers in Ohio and Michigan (and soon well beyond!).
