Featured Headlines:
The Not-So-Sweet Sixteen Commodities to Avoid
Gas Down, Railroad Trouble Up!
Airlines and Passengers Reach for the Sky
NMFS Revises NOAA Form 370
- As you may already be aware, the US National Marine Fisheries Service (NMFS) requires importers of certain HTS codes to submit a Fisheries Certificate of Origin (NOAA Form 370) to Customs and Border Protection (CBP) via the Automated Commercial Environment (ACE).
- The Office of Management and Budget (OMB) Control Number for Form 370 expired on July 31, 2022; accordingly, NMFS officials will provide a revised version of the form every 30 days until OMB has approval for the new control number.
- A list of affected items can be found here: HTS for Selected Tuna and Tuna Products.
- Click here to view CSMS #52856470.
The Not-So-Sweet Sixteen Commodities to Avoid
- The Bureau of Industry and Security (BIS) recently released a list of the primary commodities that US officials are worried may be subject to unauthorized export to Russia and/or Belarus. The 16 products identified on the list support the development of maritime technology, microelectronics and other technologies that can be used to support Russia’s military and defense sector; and include the following:
- Aircraft Parts and Equipment – ECCN 9A991
- Antennas – ECCN 7A994
- Breathing Systems – ECCN 8A992
- Cameras – ECCN 6A993
- GPS Systems – ECCN 7A994
- Inertial Measurement Units – ECCN 7A994
- Integrated Circuits – ECCN 3A001, 3A991, 5A991
- Oil Field Equipment – ECCN EAR99
- Sonar Systems – ECCN 6A991
- Spectrophotometers – ECCN 3A999
- Test Equipment – ECCN 3B992
- Thrusters (Marine) – ECCN 8A992
- Underwater Communications – ECCN 5A991
- Vacuum Pumps – ECCN 2B999
- Wafer Fabrication Equipment – ECCN 3B001, 3B991
- Wafer Substrates – ECCN 3C001 through 3C00
- Click here to see the “red flags” that may be indicative of attempts to evade Russian and/or Belarusian sanctions.
- If you’re interested in learning more about the actions taken by the US in response to Russia’s invasion of Ukraine, click here.
Gas Down, Railroad Trouble Up!
- US gasoline prices have dropped for 70 days straight—which is the longest such streak since January 2015. Though many of our readers with supply chain degrees were not yet born, the cease-fire between Crimean separatists (supported by Russia) and Ukraine fell apart in January 2015, marking the beginning of a much bigger story.
- While fuel prices are down 23% since mid-June, they remain elevated by 23% compared to August 2021. Also, the fuel surcharges imposed by truckers are down just 1% nationwide. (HA, made you look…but we have to wonder if they are down 23%!)
- With prime driving season coming to an end, we are hopeful to see further price declines at the pump and with our motor carriers. Interestingly, Biden was to blame for the gas increases, but gets no credit for the declines (oopsies, was that almost political?!).
- Despite a promise of 24% wage increases, the head of the largest US railroad union says that ownership is not doing enough to address concerns about working conditions. With only 30 days left for a cooling-off period, the clock is ticking before the rail union can legally strike (or management can execute a lock-out).
- In unrelated news, the staff at Shapiro, knowing our owner reads this Pulitzer-prize worthy newsletter, would like her to know that 20% raises are just fine with us!
- US rail workers, on the other hand, want staff level increases to allow for less restrictive attendance and overtime policies. They have indicated that they have no days off to even spend the 24%, so “what’s the point?” As positive as the rumors have been for the International Longshore and Warehouse Union (ILWU), most analysts are very concerned about a US rail strike. In total, 115,000 US rail workers are represented by 12 separate unions, thus, negotiations are also complex.
- Speaking of the ILWU…NOW they are worried about an obscure maintenance deal in Seattle?! This feels like a red herring, dear readers. Or, as your kids would say, “something’s sus.” It just doesn’t feel possible that this is a new development—but it does feel possible that peace on the West Coast may be farther from reach now.
- The Port of Charleston is launching a project to build a $550 million state-funded rail-served intermodal hub and a separate barge service to directly create port-to-rail connections. The 115-acre complex will greatly increase the port’s fluidity, capacity, and overall rail competitiveness. And, most importantly, this will surely piss off Savannah!
Export 'Controls'
- A recent article in the Wall Street Journal cites trade data that asserts the US approves nearly 100% of all tech-export requests for exports to China. Oh goodie!
- That said, we do keep talking a tough game and have had some nominal success keeping high-tech products out of Russia’s hands. As we have contended before, it is not a “great leap forward” to imagine goods flowing from China to Russia.
- Anyway, the US recently added seven China-related entities—primarily in the aerospace sector—to its export control list. The US Commerce Department justified its decision in light of national security and foreign policy threats; and a lower-level official said, “this time we are serious, and we might even enforce it.” (Okay, it isn’t nice to tease, but let’s control some exports, gang!)
- The seven parties—who shall remain nameless—are: China Aerospace Science and Technology Corporation 9th Academy 771 and 771 Research Institutes, China Academy of Space Technology 502 Research Institute, China Academy of Space Technology 513 Research Institute, China Electronics Technology Group Corporation 43 Research Institute, China Electronics Technology Group Corporation 58 Research Institute, and Zhuhai Orbita Control Systems. It has also been revealed that it takes employees for most of these firms at least a week to memorize the names of their employers.
- On a more serious note, the entities were added to the list for “acquiring and attempting to acquire US-origin items in support of China’s military modernization efforts.” On a less serious note, just missing the cut for this list were Die Now America Corp and Your Goose Will Soon Be Cooked, USA Institute.
Airlines and Passengers Reach for the Sky
- Firstly, don’t forget that when more passenger aircraft take to the skies, this expands cargo capacity, speeds transit times, and puts airlines back on a solid investment footing. Global international revenue passenger kilometers (RPKs) were up 230% in June year-over-year (YoY), while global domestic RPKs were up over 76%. OMG, the growth in RPK’s was PDQ with close to 90% of the uptick since January.
- Passenger load factors per flight topped 80% for the first time since January 2020—a very welcome sign for an airline industry looking for that silver lining. Interestingly, when measured by passenger weight, those same load factors have reached 125%, which is a sure sign that the “COVID 20” is not a myth (relax, ladies and gentlemen, only 25% of passenger flights have gone down due to the extra passenger tonnage).
- While US airlines are not back to peak employment, passenger and cargo operations added an impressive 7,000 jobs in June, pushing total US airline employment near 767,000. This is slightly higher than the city limits population of Seattle; hey, the coffee is pretty amazing in Seattle, y’all.
- Looking at the global air cargo market, rates have come down 4% in the last five weeks… (yay!); AND rates have dropped 7% since January…(yippee!); AND rates are up 53% since August 2019…(eeeeek!) We need those passenger jets back, darn it.
- Focusing on air cargo from the Asia Pacific region, chargeable kilos are down an alarming 19% YoY, while capacity is down 7%. Since we went to MIT (like all forwarders), we knew that would mean that rates from the region are up 15% YoY…because of Boyle’s Law, of course. In truth, maybe just maybe, Air China is less worried about Taiwan than flying half-empty freighters to the US. Just sayin’!
- The rotational shutdown of factories to conserve power while China gets its taste of scorching heat and brutal droughts is seen as the more feasible and rational cause of the dip in air demand for the region. We do at least hope you looked up Boyle’s Law. Based on the weather, it could be called Boil’s Law, y’all.
The Global Grab Bag
- 2M powerhouses, Maersk and MSC, are warning customers that most departures to North America from Asia will be delayed one-to-two weeks in September and possibly into October. The carriers, blaming destination port congestion, also reminded us all that they have the right to transship cargo up to 14 times before arrival. Since this seems like overkill, many shippers have challenged frequent transshipments. Though no official response was given, it was rumored that the monolithic carriers said, “buy your boat if you don’t like it.” 3M indicated that they are technically more powerful since 3 is a larger number than 2.
- The City of Brotherly Love is being considered closely as an alternate location to return empty containers vs. a beleaguered New York. While Wan Hai is the first carrier to launch a weekly direct Asia service to Philly, the concept is certain to intrigue other ocean carriers. Rocky Balboa paused briefly while yelling for Adrian to applaud Wan Hai’s ingenuity.
- The port of Chittagong (now called Chattogram) has selected RSGT to operate and manage the new $240M terminal in the busiest port in the Bay of Bengal. Chattogram, long plagued by severe port congestion, welcomes the 600-meter-long dock that can handle three vessels at a time, a key upgrade for the port complex that handles 90% of Bangladesh’s international trade. Chattogram also contacted Istanbul, famous for her own name change, about getting somebody to write a clever song about the new name!
- Stevedore labor actions in the UK and Germany continued with relations between ownership and unions only worsening. The major disruptions in Felixstowe, England are expected to persist until Christmas.
- Just as Asia significantly diminishes port congestion in several essential respects, 5 of the 6 largest European ports are experiencing extreme congestion from a total transit reliability perspective. As we all read (and read and read), at least four of America’s largest ports continue to face major delays from anchorage to berth. Since we don’t want to embarrass anybody, let us just say that Savannah, New York, Houston, and Oakland have been sent to bed without their supper (again). Interestingly, China said, “we are simply smarter than all of Europe and the US.”
The TransPac Unrap
- By month’s end, a shocking 800,000 TEUs will be voided from Asia to the US in August, with the USEC bearing the brunt. Steamships lines, interrupted while counting huge stakes of cash, said “it’s the congestion, not market manipulation!” August’s average blank levels will reach 30%, with September likely to exceed 30%. These are the highest void levels of the year, even outdoing the traditional post-CNY blank sailings in February.
- In the “we can’t catch a break” category: Off-dock dwell times at Los Angeles area rail ramps have reached an eye-popping 24 days as railroads continue to struggle to … well, move freight on choo-choo trains.
- John Mellencamp has recently re-released his famous song “Crumblin’ Down” but changed the lyrics to “when the rates come tumblin’ down, when those rates come tumblin’ tumblin’” after he watched Asia to US rates keep sliding. The simplest way to describe it is that USWC rates are about 25% from their peak and USEC rates are about halfway. Given the rate of blank sailings, it would seem we are through peak season… wait, was there a peak season this year?!
- Recent rate declines have been particularly precipitous, with an $800 drop per container to the USWC and about $80 a week to the USEC. Damn, it feels good to announce this! It also feels good to spell “precipitous” correctly the first time.
- Despite roughly 20-day berthing delays in Savannah, New York, Houston, and Vancouver, overall industry vessel reliability did improve by about 5% in the last 30 days. It is thought that this is the first improvement in over 18 months.
- As further proof that the alliance system works, ocean carrier vessel utilization rates are averaging above 93% despite the quickly softening market. Generally, it is good for us all when these folks keep those boats full, gang.
- Even with New York staring at 20 vessels in her harbor, every major US port has reported a decline in the number of vessels at anchor over the last 10 days. Maybe it is 1 or 2 fewer vessels in some case, but hey, progress is progress!
- We were interested to note that LA/LB has devised a new metric: truck appointment success rate. Unfortunately, early analysis indicated lower than 50% for SoCal—but this is a good example of the right kind of transparency and communication.
- While Archie Bunker once said, “patience is a virgin,” we all need to be keeping an eye on marine bunker prices. The cost of very low sulfur oil is down 12% in August and 30% since July 1st. Please remember that bunker is typically about 60% of a carrier’s slot cost overall. For those looking for relief on October 1st, the formula governing bunker adjustment factor (BAF) surcharges considers the average cost over three months; we are expecting BAF to be about $80/40’ higher for Q4. Ugh!
- By the end of September, we anticipate that base port China to major port US rates per 40’ will be below $5,000 for the USWC and just above $8,000 for the USEC. Well, unless the ILWU throws a gigantic wrench into our already sputtering supply chain engine.
