Featured Headlines:
Duty Free Infant Formula Act Saves Moolah
ACE Vessel Agency Account Sets Sail
Indian Freight Yikes and Hikes
Duty Free Infant Formula Act Saves Moolah
- On July 21st, President Biden signed the “Formula Act” (H.R. 8351) into law, which will temporarily suspend duty rates on imports of certain infant formula products that are entered or withdrawn from warehouse for consumption from July 22, 2022 through December 31, 2022.
- US Customs and Border Protection (CBP) has already amended the Harmonized Tariff Schedule of the United States (HTSUS) and has updated the Automated Commercial Environment (ACE) to account for this change.
- Importers should note that in order for the infant formula to be duty free, it must be classified in the correct Chapter 19 or Chapter 21 HTS number, along with the corresponding Chapter 99 HTS code.
- Please refer to CSMS #52739058 for additional information.
ACE Vessel Agency Account Sets Sail
- CBP launched a new vessel agency account in ACE on July 24, 2022— now, vessel masters, agents, as well as vessel operating common carriers (VOCC), can submit data for the Vessel Entrance and Clearance System (VECS) directly to CBP.
- Additionally, ACE users will also be enabled to launch the eCBP application to submit online payment.
- Click here to view the official Federal Register Notice.
- If you have any issues or questions regarding this deployment, check out this helpful guide from CBP or reach out directly to [email protected].
Complete Rail-ure
- Railroads have been forced to push their workers very hard as congested rail ramps, especially in Los Angeles, threaten to choke intermodal supply chains, even as some ocean ports are reducing on-port and in-harbor congestion. As we have written before, railroads have been all-but bullied in the transportation locker room. You didn’t hear it from us… but ocean terminals are particularly rough on the poor railroads.
- On a quite serious note, President Biden felt forced to sign an executive order preventing a national strike by US railway workers, represented by the Brotherhood of Locomotive Engineers and Trainmen. The order also blocked 12 other unions from engaging in secondary picketing; and in total, affected some 155,000 highly irritated railroad workers.
- As is typical in these thorny negotiations, disagreements on working conditions, benefits, and salaries head the list of tensions between ownership and workers. (A more colorful aspect of rail negotiations is who pays for those red bandanas and cool floppy hats we all wore when depicting train engineers on Halloweens past!)
- While a formal strike has been made illegal, rail workers can engage in other forms of protest. These include: slow railing (reduction in train speeds), “working to the letter” where workers only perform the exact tasks mentioned in contracts and sticking the tongue out while waggling your hands and fingers wildly above the ears.
- As if the railroads didn’t have enough trouble, most have had to impose surcharges at badly congested ramps, as more and more shippers are forced to use containers and chassis as mobile storage. A severe lack of available warehouse space in many US markets plays a big role in this badly written drama—it’s easy to blame the railroads, but the system breaks down entirely without the timely return of chassis and empties.
- If any of our dear readers are holding chassis and laden containers hostage, please know that the children of all the rail workers would like to thank you for the fewer Christmas presents this year (and the skinny turkey at Thanksgiving too).
Indian Freight Yikes and Hikes
- After announcing significant ocean freight general rate increases (GRIs), the major ocean carriers running the India trade just raised many charges and fees affecting landside cargo, including the cost of rail. In fact, one major carrier apparently said, “if any shipper in India even THINKS about a container move, we may have to impose a surcharge.”
- The largest ocean carrier in the trade, MSC, has also raised terminal handling charges at the major export rail ramps serving Nhava Sheva and Mundra.
- While the fee for even considering a shipment is still unknown, the combination of rate hikes and surcharges is expected to increase landside transportation from India by 7-10%. The looming ocean GRIs and PSSs (peak season surcharges) for the trade are expected to add nearly 20% to current ocean costs…. But wait, there’s more!
- Hmmm, how else can the industry punish these hard-working shippers in India? Let’s put hefty surcharges on hefty shipments! Let’s go with a heavy levy… a chunky charge… a fatso embargo … if you will.
- CMA CGM is the latest ocean carrier to announce surcharges for shipments over 20 tons (including tare-weight). The typical heavy-weight surcharge is $1000 per container. On a side note, a spokesperson for Weight Watchers mentioned that the retailer diet giant is investigating the fairness of picking on “bigger” bills of lading.
Rotterdam’s Rotten Results
- For the first six months of 2022, Rotterdam’s total tonnage dropped nearly 5.5% year-over-year. Among the world’s top 5 ports—and the largest in Europe—Rotterdam serves as an economic bell-weather for the European Union (EU). While 5.5% does sound too bad, the slump has grown as the year has progressed. When asked for comment, every single port executive for Rotterdam was said to be in Amsterdam looking for ways for forget their woes.
- The main cause for the reduction is the loss of Russian cargoes after most major ocean carriers have eliminated or have begun to eliminate Russian routes. While the embargo has struck all commodity groups, the imports of Russian dressing have really declined.
- Rotterdam should not feel lonely as the second largest European gateway, Antwerp, has shrunk at an even faster pace YTD. While Russia plays a role, commentators in Antwerp point to inflation suppressed spending as a continuing lag for overall demand.
- Not unlike her ketchup-loving, spandex-wearing cousins in America, Europe has struggled greatly with vessel bunching, schedule unreliability, and a profound dislocation of chassis and empty containers. In essence, the international shipping infrastructure has been de-optimized. Now, THAT was one heck of a sentence, gentle readers!
- So, at the end of the day, despite volume and tonnage slips, major European ports continue to struggle with congestion and delays. Fortunately for Europe, there are many smaller ports that can accommodate transshipment work and re-routes. Thus, there is hope that congestion will wane… but only IF those Rotterdam executives will just come home from Amsterdam.
Big Ship Energy
- As we all know, those of us in the industry try to explain the madness that makes up our careers at dinner parties, neighborhood picnics, and moonlit occult celebrations. So, every single one of you should already know that 80% of the Earth’s international trade moves by ocean freight, and close to 85% of that trade moves on just 10 ocean carriers. We’re willing to bet that 82.5% of you can’t name those 10 today, and the order of the horses running in the race keeps changing. So, without further fanfare, here is a current list of the Top 10 global ocean carriers (listed in order of TEU capacity):
| Rank | Carrier | TEU Capacity (in millions) | Number of Ships |
| 1 | MSC | 4.4 | 606 |
| 2 | Maersk | 4.3 | 718 |
| 3 | CMA CGM | 3.2 | 542 |
| 4 | Cosco | 2.9 | 497 |
| 5 | Hapag-Lloyd | 1.7 | 259 |
| 6 | O.N.E. | 1.5 | 218 |
| 7 | Evergreen | 1.5 | 201 |
| 8 | Hyundai | 0.8 | 79 |
| 9 | Yang Ming | 0.7 | 87 |
| 10 | Wan Hai Lines | 0.4 | 146 |
What's That Smell?
- US exporters are on track to triple President Biden’s promise to increase liquified natural gas (LNG) shipments to Europe by 15 billion cubic meters in 2022. (5 times 3 is still 45!)
- Historically, American exports of LNG to Europe represent a third of American trade in the fuel. Most LNG prefers to be shipped in late Spring to Paris or Rome, but that’s just a bunch of hot air.
- In 2022, US LNG exports to the EU will gobble up nearly 70% of American shipments by volume; this 37% market share gain is the highest single year change on record.
- Before we honor LNG exporters with a garland for generously helping the EU, much of the volume shift comes at the expense of poorer countries who can no longer afford the higher prices. Additionally, US companies can afford to pay contract penalties when they fail to deliver to Pakistan, for example. And Pakistan is pissed, as imports of US LNG for Pakistan have plunged 72% this year.
- Get ready for a plentiful number of end-use percentages; you will be quizzed later. Here goes: In 2022, European LNG costs 212% more; Asian LNG is up 166%; American LNG is up 164%. (Deep breath). LNG in Europe is 114% more than LNG in Asia. Seatbelts on, kids… European LNG is 557% more costly than LNG in the US.
- Despite the high costs, the EU, especially Germany, must find new sources, as Russia continues to “dial-down” pipeline volumes. Winter is coming!
