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Featured Headlines:

Three Company Names Added to the Naughty Entity List

Section 301 Turns a New Year Page

DOC Grants Three Export-ant Wishes

Euro Trouble If You Don’t Read This!

Georgia’s Rail Revolution

Frozen Freight Rates

Canada Cross-Border Consolidations

South Korea Bid Battle Bonanza

Middle East Manuevers

China’s Choppy Course

Panama and Suez Canal-sequences

Blowing Into the Future

Three Company Names Added to the Naughty Entity List

  • On December 8th, the U.S. Department of Homeland Security (DHS) added three China-based companies to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List—bringing the total number of restricted companies to 30.
  • As a result, goods produced by the following companies will be restricted from entering the United States effective December 11, 2023:
    • COFCO Sugar Holding Co. Ltd.
    • Sichuan Jingweida Technology Group Co., Ltd; and
    • Anhui Xinya New Materials Co., Ltd.
  • The UFLPA was first signed into law by President Biden in December 2021; and since then, U.S. Customs and Border Protection (CBP) officials have reviewed over 6,000 shipments totaling more than $2 billion.
  • For additional details about the UFLPA Entity List, please refer to the official Federal Register Notice (2023-26984).
  • Interested in learning more about Forced Labor? Visit our Forced Labor Hot News page for the latest and greatest UFLPA updates.

Section 301 Turns a New Year Page

  • With the new year quickly approaching, we would like to remind you that numerous Section 301 exclusions are set to expire on January 1, 2024; this means that importers may be subject to additional duties on their products as soon as next month.
  • The list contains over 300 exclusions for various products, as well as 77 medical care-specific products.
  • While there is some speculation that there may be some extensions to these exclusions and/or some additions or removals; nothing has been confirmed at this time.
  • The lists of affected product exclusions can be viewed here.
  • Never miss another Section 301 breaking news alert! Click here to subscribe to receive our complimentary ShapFlash Alerts or visit our Tariff News page for the latest updates.

DOC Grants Three Export-ant Wishes

  • On December 7th, the Commerce Department’s Bureau of Industry and Security (BIS) released three rules as part of a broad effort to ease several categories of export licensing requirements and expand the availability of export license exceptions for key allied and partner countries, as well as for members of certain multilateral export control regimes.
Rule Details Resource Link
Rule #1 Changes licensing requirements for certain Australia Group (AG)-controlled pathogens and toxins (and their related technologies) so that no license is required to AG countries, unless the item is also subject to Chemical Weapons Convention controls.

Removes crime control licensing requirements for Austria, Finland, Ireland, Liechtenstein, South Korea, Sweden, and Switzerland. These countries are in the Global Export Controls Coalition (GECC) (countries listed in supplement 3 to part 746 of the Export Administration Regulations (EAR)) and maintain a commitment to protecting human rights.

Allied Governments Favorable Treatment
Rule #2

Expands license exception eligibility to additional countries for certain missile technology items excluding any countries of concern for missile technology reasons or that are subject to a U.S. arms embargo (i.e., countries specified in Country Groups D:4 or D:5).

Updates list-based controls to align with recent Missile Technology Control Regime (MTCR) control list changes.

Missile Technology Control Regime Plenary Agreement
Rule #3 Seeks public comment on ways to facilitate use of License Exception Strategic Trade Authorization (STA), including by clarifying which items are eligible for STA to certain destinations, and proposing a number of changes intended to increase the usage of STA and reduce the burden on exporters, re-exporters, and transferors, while at the same time still ensuring that U.S. national security and foreign policy interests are protected for items authored under STA. Simplification of License Exception Strategic Trade Authorization (STA)
  • According to the Under Secretary of Commerce for Industry and Security, Alan Estevez, “These rules will more accurately reflect the current national security and foreign policy posture of the United States Government. They will create a stronger environment to facilitate cooperation by reducing the licensing burden for items destined to our closest allies and partners.”

Euro Trouble If You Don’t Read This!

  • U.S. Customs and Border Protection (CBP) recently issued a bulletin to clarify currency and paperwork requirements for importers entering goods from the Euro area.
  • To read the full announcement, including the full list of Euro countries, please refer to CSMS # 58565185.

Georgia’s Rail Revolution

  • The Georgia Ports Authority (GPA) is all aboard the growth express, allocating funds to establish a new inland rail terminal. This strategic move aims to enhance container movements between the Port of Savannah and Northeast Georgia, expanding GPA’s intermodal franchise.
  • With a $127 million budget sanctioned by the GPA board, the construction of the Blue Ridge Connector is on track, pun intended. This 104-acre inland rail terminal, located at the Gateway Industrial Centre (cheerio!) north of Gainesville, GA, is set to open its gates in 2026, with construction starting next year.
  • The Blue Ridge Connector will boast 18,000 feet of working track and an impressive annual lift capacity of up to 200,000 containers. This terminal will be linked to Savannah’s Mason Mega rail terminal, recently upgraded to handle up to 1 million containers per year, by Norfolk Southern’s rail service.
  • In addition to the Blue Ridge Connector, GPA’s board has green-lit a $44.5 million investment to construct a new 300,000-square-foot facility at the Garden City Terminal. This facility, earmarked for customs inspections, will house offices for US Customs and Border Protection and include cold-storage warehousing, ensuring a smooth and secure shipping process.

Frozen Freight Rates

  • Truckload rates dipped in November, casting a shadow over the typical holiday season surge. November saw average U.S. shipper rates hit $2.24 per mile (seasonally weighted) and $2.38 (unweighted) which is a slight decrease from October.
  • Despite hopes for a holiday haul boost, the market mirrored pre-pandemic patterns, with tender acceptance rates unusually high. This has led to less spot market activity and a cooler cargo climate.
  • Inbound freight has been all but frozen with shippers noting a lack of inventory replenishment, both from imports and domestic sources.
  • US imports from Asia are down ~17% YoY, which has domestic carriers scrambling to accept initial offers.
  • Analysts predict a slight rise in spot rates in December, but overall, 2023 is expected to end on a low note. High-interest rates are keeping shippers’ inventory ambitions on ice, waiting for a thaw in the form of lower rates to reinvigorate the market sleigh.

Canada Cross-Border Consolidations

  • Earlier in the year, we reported on the significant increase in demand in Canada for vehicles being imported from the United States.
  • The US and Canada share a deeply interwoven industrial igloo, which has seen increasing YoY growth, with Canada being a massive importer.
  • This demand may be stretching to other industries as companies skate into acquisitions to bolster their cross-border prowess.
  • The closure of Yellow and its Canadian subsidiary left a gap in cross-border LTL traffic. But like true Arctic adventurers, Roadrunner, a major US LTL carrier, and others are sledding into the opportunity, proving that when one snowflake falls, another one takes its place.
  • Roadrunner CEO Chris Jamroz, a Canadian himself, sees this expansion as a homecoming – a cool celebration of cross-border camaraderie.

South Korea Bid Battle Bonanza

  • Hyundai Merchant Marine (HMM), South Korea’s maritime pride, is ready to part with a 40.65% stake, waving goodbye to the good old days of state-control (since 2016).
  • Dongwon Group and Harim Group are in a high-stakes game of Monopoly, each throwing about 5 billion USD in bids for HMM’s shares. The big question now is who gets to pass ‘Go’ and collect their maritime prize by year-end.
  • Dongwon Group is accusing its rival bidder, Harim Group, of making an ‘unfair’ bid in a classic case of “he said, she said.”
  • Dongwon’s grievance centers around Harim’s request to Korean banks to hold off on converting their bonds into more HMM shares which is a breach of bidding criteria. An acquisition price is supposed to be submitted based on the total number of potential shares and these bonds could affect the price by an estimated 1 billion USD. (Hey, we get a TON of Wall Street attention, and THEY know what this means!)
  • This fishy battle for shares is literally a game of chicken (and is literally fishy!). Harim Group is Korea’s largest producer of chicken, and Dongwon is the king of seafood!

Middle East Manuevers

  • In a game of follow the leader, Maersk, following Zim and Hapag-Lloyd, has introduced an emergency risk surcharge (ERS) for cargo discharged at Israeli ports due to the ongoing conflict in Gaza.
  • Importers should be ready to shell out an extra $25 to $100 per container on all bookings starting January 8, 2024, as carriers combat rapidly increasing insurance premiums for vessels steering toward Israel.
  • Fortunately, Maersk is reeling in the life buoys where they can for cargo headed to Israel, including free change of destination services, detention and demurrage clock stops, and waived booked amendment/cancellation fees.
  • Some vessels are even taking the scenic route around the Cape of Good Hope, which adds two weeks to sail time and an uptick in average cost per container of 30%.
  • During these tough and violent times, there are even reports of using military vessels to escort commercial convoys to the Suez Canal. We’re keeping a close eye on this developing story.  Reach out to us at [email protected] for the latest and greatest freight strategies.

China’s Choppy Course

  • China’s economy, once the speedboat zipping ahead in the global shipping race, seems to be switching to a rowboat. Leland Miller, the CEO at China Beige Book, has spotted some potential doldrums, possibly making shipowners switch to paddle power!
  • The market’s mood swings in China in 2023 have been extreme, from high hopes of post-COVID growth to fears of economic collapse. China’s container exports to the U.S. and Europe are weakening, while automotive exports are booming, which could result in a trade war.
  • Adding fuel to this potential fire, Xi Jinping’s focus has shifted from high-speed growth to a slower, more internally focused economic model. This signals a new navigational path for the Chinese economy vs. the previous trend of government stimulus for growth at all costs.
  • Miller also suggests that the market underestimates the risk of potential military conflict, especially over Taiwan, a scenario that could rock the “mega-vessel” for ocean shipping.
  • The stakes are very high as we view today’s Chinese economic (and cultural?) malaise, and those stakes become hard to calculate should military tensions rise further or spill over into conflict.

Panama and Suez Canal-sequences

  • We purchasers of container space from Asia and beyond kept reading about the Panama Canal water shortage, and maybe a few of our heavy containers got bumped. Let’s face it, it was what my Grandma called “a tempest in a teacup,” just not a big supply chain disruption. What a difference a month makes!
  • First, we learned that the number of vessels permitted to transit the locks will be reduced an additional 25% (for a total reduction above 50%) in February, in anticipation of poor precipitation leading to palpitations during Panama’s dry season. Eek!
  • Then, we watched a monkey-see-monkey-do cycle of Panama Canal surcharges (starring MSC but featuring all the famous carrier names). It seems obvious that the carriers were also growing weary of paying hefty tariffs to “cut in line” in Panama.  Ouch!
  • Then, many carriers announced re-routings via the Suez. Hey, they’ll just do that on backhaul moves, right?!   A few poor farmers may learn their grain rotted in transit, but we importers will be okay, right?!  And, even if the fronthaul goes via Egypt, we’re looking at 4-5 days extra transit, right?!  Not so fast!
  • Hello, cuddly Houthis with your armed drones, missiles, and the love of Iran. So nice to see you in the Bab el-Mandeb strait!   Thank you for greeting the wave of commercial vessels headed to the Suez with your extremely violent expressions of welcome!   By last count, at least 10 commercial vessels have either been attacked, sunk, or captured.   Alas!
  • Just this week, the Houthis extended their unique welcome to “all vessels potentially headed to Israel.” Previously, they attempted to “high five” (well, “deep six”) only Israeli boats (though they have already mistaken vessels from China, Norway, and beyond).   Yippee!
  • Over the last week, ocean carriers have begun to route ships around Africa via the Cape of Good Hope. Zim started the trend (and for good reason since they are Israeli), but we’ve seen announcements across the global fleet at this point.   Gasp!
  • So, what happens to shippers without a canal? What indeed are the #canalsequences?!
    • Transits will extend by 4-7 days via Suez and 10-14 via the Cape.
    • We can expect “security surcharges” as carriers pay more for insurance and frankly risk their multi-million-dollar assets (to say nothing of the safety of their crews).
    • Longer transits equal more fuel costs, and something like 40% of our freight rates cover the bunker as it is. Expect the base ocean to increase to cover more fuel.
    • Blank sailings will spike because vessels will not be back home in time to meet schedules.
    • Empty container shortages will abound, especially at origin… again, when the vessels are on the water longer, so are those empties.
    • There will be plagues of frogs, locusts, and things like that! Well, it feels possible!
    • Clever importers will look to USWC ports to connect to rail to get to EC destinations. There is only one catch, supply chain tacticians… rail routings east cost as much as 100% more than all-water routings.
    • If we imagine a 40’ of dog grooming tools from Shanghai to NY costing $2500 through the Panama, that sucker will near $5000 if you rail it from LA or Vancouver.
    • Many steamship lines no longer have rail contracts to support long-haul rail via the West Coast. How will they deliver decent service at a decent price for “new” rail lanes?
    • The landside infrastructure, in the U.S. and Canada, is not ready for a significant rail volume spike. Unfortunately, this is true on both coasts and in the middle, gang.   Remember, you need a rail ramp on both sides to complete an EC routing via the WC.
  • We fear that we all be in a “slower but more expensive” vs. “faster but MUCH more expensive” pickle without a pickleball racket to swat the problem “over the net.” That said, your fearless crew of Shapiro logisticians is here to help; reach out to [email protected] for assistance.

Blowing Into the Future

  • Hapag-Lloyd is catching the wind of innovation with a wind-assisted propulsion project for container ships, in partnership with yachtsman Boris Herrmann and Team Malizia.
  • The proposed design includes eight sails with a total area of 3,000 square meters. For you sports fans out there, that’s roughly 3/4ths of a football field. The sails are designed to be extendable and retractable, ensuring they don’t interfere with cargo operations.
  • The ship’s main propulsion will remain engine-based, but the sails will provide supplementary power, depending on wind conditions and ship speed.
  • They’ve been running simulations in a digital ocean, testing this breezy idea under various weather scenarios and routes. The results from these virtual voyages will chart the course for an actual concept vessel in the coming months.