Featured Headlines:
Carriers Cheer for High FAK Rate Kicks
Commerce Department Exercises Its Right to Bear Arms
APHIS Users: Brace for Inspection Impact!
Are You Tuned into Baltimore's New Channels?
Chicago Dishes Deep on Rail Relief
G-S-P, Easy As 1-2-3
- Before we go any further, allow us to apologize whole-heartedly to any of our readers that may now be subjected to the misfortune of having the Jackson 5 classic stuck in the back of your head…God speed.
- Now that we’ve addressed the elephant in the room, it’s time to talk about one of the hottest bills on the congressional docket—the potential renewal of the Generalized System of Preferences (GSP).
- Originally authorized by Congress on January 1, 1976, GSP is widely recognized as the oldest and largest trade preference program in the United States. The program expired on December 31, 2020 after US legislators failed to garner the necessary votes needed to renew the program.
- On April 15, 2024, Rep. Adrian Smith (R-NE) introduced the GSP Reform Act (H.R. 7986), which would effectively restore GSP retroactively to December 31, 2020 (allowing for retroactive refunds), with an expiration date of, wait for it…. December 31, 2030!
- In addition to the above, GSP proposes to do the following:
- Review country eligibility every three years.
- Formally ban Chinese products from GSP benefits.
- Remove GSP status from beneficiary countries who commit gross human rights violations and/or permit construction of military bases by US adversaries, including China, Russia, North Korea, and Iran.
- Sets origin requirements of 35% starting in 2024, gradually increasing to 50% by 2031.
- Additional information about retroactive refund requirements can be found on US Customs and Border Protection’s (CBP) designated GSP webpage.
- Please note that refunds will not be quick and will require importers to remain patient as officials work to review the vast number of claims anticipated.
- Don’t rely on your ESP when it comes to GSP! Reach out to our Compliance Crew to see how your products may potentially be impacted by the renewal.
Carriers Cheer for High FAK Rate Kicks
- After a few too many trips around the Cape of Good Hope, it appears that there might finally be some good news and hope on the horizon—well, for shipping lines that is.
- Industry analysts suggest that current heightened demand levels will likely stick around well into the summer peak season—meaning that the recent barrage of Freight of All Kinds (FAK) rate hikes are here for the long(ish) haul.
- In the first quarter of 2024, imports to West Coast ports in the US and Canada increased by 24% year-over-year (YoY). European imports from Asia also rose by 12% during this period. Even more striking, Asia to India and Oceania reported a 30% surge in imports, indicating robust demand in these regions.
- Global issues are largely to blame for the rise in FAK rates, as shippers remain plagued by longer sail times and limited capacity amid the ongoing situation in the Red Sea (amongst others).
- According to MSC, it’s unlikely that rates will decrease as long as the Red Sea crisis continues to create regional tensions and geopolitical conundrums. However, if and when things cool off in the Middle East, we could see a rapid drop in FAK rates as carriers resume using the Suez Canal and more capacity is available.
- You know when you’re having a decent day, and then you poke yourself in the eye or bump your head or (gasssssp!) stub your toe on something metal and pointy? Well, at least three steamship lines, who will remain unnamed, though their names might remind you of Hapag, CMA, and Maersk, have agreed to higher cost charters to take advantage of the cargo swell, thus committing to extra capacity right when demand in in their favor.
No More Port for Portland
- After enduring millions in crippling losses, leaders at the Port of Portland revealed that it is ceasing container operations at its terminals, insisting that state lawmakers are to blame for the port’s financial woes.
- Previously a vital shipping hub for toys, agricultural goods, and other West Coast bound products to Oregon, Washington, and Idaho—local businesses will carry the brunt of the load as they reroute shipments through Tacoma or Seattle instead. This will add an estimated $200 per container to their costs.
- Although the port has been losing over $10 million annually, the situation rapidly worsened after a deal fell through with a potential third-party operator.
- Operations are scheduled to officially close in Portland on October 1, 2024; however, activity has already taken a deep dive as businesses work to divert supply chains to alternative ports.
Commerce Department Exercises Its Right to Bear Arms
- The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently released an interim final rule (IFR) to amend its licensing policy for exports of firearms, ammunition, and related components under its jurisdiction.
- The new rule is intended to reduce the risk of legally exported firearms and related items being diverted or misused to fuel regional instability, drug trafficking, human rights violations, political violence, and other activities that undermine US national security and foreign policy interests.
- It also addresses the following:
- Identifies semiautomatic firearms under new Export Control Classification Numbers (ECCNs); and
- Adds additional license requirements for Crime Control and Detection (CC) items, thereby resulting in additional restrictions on the availability of license exceptions for most destinations.
- The ruling includes a presumption of denial for commercial transactions in countries that the State Department has identified as high-risk.
- In addition to the new rule, on July 1, 2024, BIS will revoke currently valid licenses that authorize exports of firearms to non-government end users in the destinations identified by the State Department.
- According to BIS officials, the agency is requesting public comment regarding additional changes to export controls on firearms and related items.
- For additional information regarding this announcement, please refer to the Federal Register Notice (2024-08813) or the Commerce Department’s press release dated April 26, 2024.
APHIS Users: Brace for Inspection Impact!
- The U.S. Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) announced a final rule to amend the regulations governing its Agricultural Quarantine and Inspection (AQI) program user fees.
- US Customs and Border Protection (CBP) and APHIS officials jointly administer the AQI program, which works to ensure that cargo and passenger baggage entering the US is inspected for plants, pest, and animal diseases that could potentially affect domestic agriculture, trade, and commerce.
- These fees were last updated in 2015. The increase will go into effect on October 1, 2024, and will be used to help fund CBP and APHIS Inspectors.
- The complete list of fees will be published in the Federal Register. To learn more about this announcement, please review CSMS # 60401934.
The YTD Air Cargo Game Show
- From 30,000 feet, let’s admire the azure skies and those lovely clouds shaped like gazelles as we accept a fizzy cold concoction from the most cheerful flight attendant in the history of manned flight! What do we see in the first quarter and 1/3 for the global airfreight industry?
- Rates: From the broadest perspective, air cargo rates continue to be elevated compared to pre-Covid levels, despite very impressive passenger demand (which brings those valuable bellies for freight). From military conflicts to labor shortages to volcanic activity, it has been difficult for airlines to quickly add freight capacity. Oh, and it doesn’t hurt that they have been quite disciplined in the utilization of their freighters!
- Chargeable Kilos: The demand for airfreight, as measured by chargeable kilos, has shown resilience despite the overall challenging operating environment. For industries such as automotive and high-end manufacturing, the dwindling reliability of ocean freight has pushed shippers to the expensive delights of air cargo.
- Load Factors: A key indicator of operational efficiency, load factors have generally remained high across the industry. Carriers have optimized cargo capacity utilization through measures such as dynamic pricing, network adjustments, and the deployment of more fuel-efficient aircraft. However, the challenge of achieving optimal load factors while managing volatile demand and capacity fluctuations remains an ongoing concern for airlines and freight forwarders. Op-ed interjection: as bad as the airlines had it during Covid, we should applaud their broad operational efficiencies, gang!
- Commodity Trends: Can we peruse one article about supply chain without reading about E-commerce growth? No! E-commerce, especially in electronics and accessories, is now a big dog in the air cargo kennel. Additionally, pharmaceuticals, including cold chain, has remained strong since 2020. While perishables have always been a star for airlines, there has been growth connected to slowing ocean transits, especially for foodstuffs including seafood (should that stuff EVER go by ocean??!!). At the risk of repeating ourselves, automotive and other just-in-time manufacturing designs just can’t afford to gamble on ocean freight, perhaps floating slowly around Africa to avoid the Houthis.
- Overall, airfreight demand is still is the “pilot’s seat” compared to capacity. With so many geopolitical and supply chain disruptions affecting ocean reliability AND airline total cargo capacity, it is very difficult to see a buyers’ market for air cargo this year.
On the ILA, We Do Weigh
- Now, before you finicky readers even raise your eyebrows: yes, an International Longshoremen’s Association (ILA) upheaval will be a GLOBAL story in supply chains! No, stop it… it does NOT belong in International Freight News!
- Spoiler alert: every pundit in this crazy business is saying that the ILA will not strike right before an election out of loyalty to Democratic nominee, Joe Biden. “Full stop,” they say.
- Yet, a quick glance at the somewhat recent ILWU proceedings (among MANY other similar negotiations), and we see that these deliberations are almost always delayed and sometimes by as long as a year. Do NOT be surprised if there is no contract before the US election, scholarly readers!
- The United States Maritime Alliance (USMX) will be in very high cotton for container demand by August, hey we are there now in the US, and they will be in no mood to block the steady stream, of cargo, some of which will be routed with new tariff fears in mind.
- With 45,000 workers from Texas to Maine, the stakes are as high as possible for the master services agreement that expires September 30, 2024.
- Unlike their brothers and sisters on the West Coast, who waited so long that demand crumbled before their eyes, the ILA is in a very strong negotiating position this year. The only problem is that, since these contracts are six-year deals, they overlap with elections every other cycle.
- We think the ILA should shift to seven-year deals so that only every fourth negotiation is complicated by a US election. The ILA has yet to call us for our brilliant consulting help, but it is only early May, folks!
Are You Tuned into Baltimore's New Channels?
- Last week, officials from the Key Bridge Response 2024 Unified Command revealed the successful opening of four channels that would allow limited commercial traffic to partially resume operations through the Port of Baltimore.
- The announcement is a significant and major milestone for Baltimore, after an agonizing and arduous month at the port following the collapse of the Francis Scott Key Bridge in late March.
- At a depth of 35 feet, the fourth channel was intended to accommodate “commercially essential vessels,” including five of the seven cargo ships stranded in the harbor.
- Officials temporarily opened the channel on Thursday, April 25; however, it was closed on Monday, April 29 to allow Unified Command personnel to safely resume salvage operations. It’s expected to remain closed until approximately May 10 when it will briefly open again.
- At this time, the port’s main channel—which is 50 feet deep—is projected to reopen to normal marine traffic at the end of May.
- The creation of all four interim channels puts the port’s clean-up efforts slightly ahead of schedule, offering a glimmer of hope for all those impacted by this tragic disaster.
- Baltimore Strong!
FMCSA Drops a Pin on Safety
- In April, the Federal Motor Carrier Safety Administration (FMCSA) held its Analysis, Research, and Technology Forum, an annual event jam packed with thought-provoking and critical thinking discussions ranging from new proposals, studies, research, and crash data collection plans.
- A final joint rule will be issued to standardize equipment on heavy trucks for automatic emergency braking systems, transparency in property carrier broker transactions, and amendments to the integration of automated driving systems.
- These steps are in response to a somewhat concerning spike in the number of truck-involved fatal crashes, truck fatal pedestrian accidents, and positive drug tests.
- The FMCSA has a hefty $30 million ready to be funneled into research on crash causation and to determine best practices for operating vehicles including technologies like advanced emergency braking, pedestrian warning systems, blind spot warning systems, lane departure, and lane keeping assist.
- It’s been a hot decade since anyone took a serious, in-depth look at crash causation (since 2003, to be exact). Never fear, for the FMSCA is already well on its way towards completing a comprehensive, two-year study on some of these deeper issues.
Chasing Chassis
- Consumer vehicles aren’t the only things piling up on dealer lots these days! Intermodal chassis manufacturers are feeling the effects of a supply overhang as demand weakens in the trucking market. In fact, one manufacturing executive described the current landscape as being “extremely soft,” much like America’s beloved Pillsbury Dough Boy.
- Leasing companies are feeling the strain too, utilizing only about 50% of their capacity. ACT research has even scaled back its 2024 chassis production forecast in light of these trends.
- During the pandemic, chassis production soared to over 60,000 units, mirroring the boom seen with consumer cars. However, that level of production was unsustainable in the long run.
- Now, we’re seeing more supply than demand for chassis, which is one of the leading contributing factors in the current supply imbalance, along with economic uncertainties and the looming Presidential election.
- Many operators are holding back on new purchases for the moment, as they await a clear sign that demand is on the rise again. Meanwhile, many larger fleets have idle chassis ready to roll out when that time comes.
- As US containerized imports soar, it feels very likely that time will indeed come!
Chicago Dishes Deep on Rail Relief
- Here’s what’s currently going unfolding at the Landers terminal in Chicago, where the pickup lines have been just as deep as the city’s famous pizza.
- Since the beginning of 2024, truckers at the Chicago terminals have experienced waves of long waits to retrieve ocean containers, often stretching into multiple hours.
- Don’t worry, there’s some good news: the percentage of drivers waiting more than two hours has dropped from 10% to 5.6%. Anyone picking up during midday is likely to fall into that unlucky 5.6% as that is still peak activity. (Wahoo!)
- Another issue involves truckers butting in line to retrieve their containers fast and furiously. Although the railroads want to end this practice, they have yet to offer up any concrete plans for stopping these line bullies.
- On a brighter note, the rail is also making efforts to keep cranes in operation by employing more crane operators and keeping up with repairs. How generous of them!
