Featured Headlines:
CBP Is So Over the Counterfeit
Carriers Lack Capacity to Control Capacity
Shrimp and SIMP
- On December 28th, the National Marine Fisheries Service (NMFS) issued a proposed ruling to expand the Seafood Import Monitoring Program (SIMP)—a program established in 2016 to help identify illegal, unreported and unregulated fish and fish products entering the US.
- The proposed rule includes modifications and clarifications to SIMP; and also seeks to add the following species to the 1100 species already being monitored by the program.
- Snapper (all species);
- Eels;
- Squid and cuttlefish;
- Octopus;
- Queen conch;
- Caribbean spiny lobster; and
- Tuna (any remaining species not already on the list).
- Importers can submit written comments to the proposed rule until March 28, 2023.
- Click here to read the full Federal Register Notice.
- If you have any questions about your food imports, contact our compliance experts!
CBP Is So Over the Counterfeit
- Another year is officially in the books—and at first glance, it appears that 2022 was off the charts…in more ways than one!
- US Customs and Border Protection (CBP) announced a new record for counterfeit merchandise in fiscal year 2022. According to officials, the total estimated value for counterfeit items imported last year exceeded $1 billion.
- The most pirated items included wearing apparel, accessories, handbags, wallets, footwear, watches, jewelry and consumer electronics.
- To avoid falling victim to counterfeiters, importers should practice due diligence and keep an eye out for red flags, such as the following:
- Purchase goods directly from the trademark holder or from authorized retailers.
- When shopping online, read seller reviews and check for a working US phone number and address that can be used to contact the seller.
- Remember, if the price seems too good to be true, it probably is.
- For more information, we recommend reading CBP’s E-Commerce Counterfeit Awareness Guide for Consumers.
- And, as an added bonus, here is a full list of penalties issued by the Transportation Safety Administration (TSA). Enjoy, dear readers!
Playing D&D With the FMC
- On our holy quest to locate The Grail of Fairness for Demurrage, Detention, and Per Diem, we face many obstacles and foes. Unfortunately, all stakeholders have valid arguments…
- In response to the Ocean Shipping Reform Act of 2022 (OSRA22), the Federal Maritime Commission (FMC) has sought rulemaking and judgements to better protect the shipping public (cargo owners, 3PLs, and truckers) from all forms of detention charges connected to events outside the control of that noble shipping public.
- This week, the full leadership of the FMC voted, and a large majority sided with an unnamed drayage trucker (TCW, Inc) against Evergreen Marine on a case connected to per diem charges assessed over a holiday weekend. Since it’s impossible to return equipment to a closed port, the ruling sounds fair on the face of it.
- However, one FMC commissioner who will remain nameless (Carl Bentzel) sided with Evergreen and indicated that public holiday schedules are published well in advance, and shippers should be incentivized to return equipment before the holiday. He did indicate that unexpected port closures or reduced hours should not be the cause of detention fees.
- The Evergreen judgment and potential precedent could well save importers, exporters and their agents millions of dollars each year. ‘Tis but a flesh wound for the ocean carriers, but it is encouraging to see the FMC grasping the sword of justice.
- The FMC was also in the press this week because they have collected stakeholder comments for their proposed rulemaking in support of “properly issued invoices.” The first draft rules indicated that only the party who contracts the transportation can be invoiced for demurrage, detention, or per diem, and it lays out minimum information requirements for issuing a valid storage invoice.
- On one side, shippers and their agents have watched steamships and/or terminals invoice the shipper, consignee, notify party, dray trucker, and the Ghost of Christmas’ Past for padded charges assessed during times pick-up or delivery was impossible. Fighting charges have largely been frustrating and fruitless, and all parties end up on credit hold!
- Seen from the view of marine terminal operators and ocean carriers, they just got a political black eye for port congestion and ships at anchor, and now they have to invoice a shipper in Tibet for demurrage?! Is THAT going to promote cargo fluidity at US ports and rail ramps?! Not ever is the answer.
- Also, what will happen to the incentives for shippers to pick up cargo timely and to return valuable equipment on time? US shippers have earned their bad reputation for using containers as rolling storage and abandoning loaded boxes on-port.
- Interestingly, both shippers and carriers oppose the suggested rule for only billing contracting parties for demurrage, detention, or per diem. All parties see big troubles coming when parties are overseas and/or have fulfilled their terms of sale obligations before cargo pick-up and container return.
- For their part, dray carriers have long reviled the notion that a simple interchange agreement obligates them for thousands and thousands of dollars of lost cash flow (at best) and grave financial risk for storage fees, known as “being left holding the bag” (at worst).
Airlines' Baselines
- Headline: The International Air Transport Association (IATA) predicts that the airline industry will return to profitability in 2023 for the first time since COVID. The $4.7 billion profit projection is just 17.8% of 2019’s robust $26.4 billion profit.
- Land Mine: The airline industry is set to lose $6.9 billion in 2022; this is 84% better than 2021, and 95% better than 2020. Ouch! The industry will have lost $187 billion since the start of the pandemic. DOUBLE ouch!
- Pipeline: As we have noted before, the bright light for airlines has come from their cargo operations. For two years running, airline profits from cargo will top $200 billion, which is more than double the industry’s cargo yield from 2019. Unfortunately, IATA expects 2023 air cargo profits to drop approximately $50 billion to land near $150 billion.
- Guideline: While air cargo volumes are expected to drop 5%, the key to the profit decline is the growing availability of passenger aircraft belly space. This increased capacity and the modest dip in volume should combine to diminish rates by more than 20% next year.
- Gold Mine: Let’s put that 20% decline in perspective. In 2020, cargo yields soared (pun intended) by 52.5% compared to 2019. Not to be outdone, 2021 witnessed another 24.2% increase! This year, the industry profit altitudes climbed even a bit higher, a further 7.2%. Thus, 2023 cargo rate levels should sit well above 50% higher than pre-pandemic realities.
- Hardline: With total industry revenues forecast around $780 billion, profits will sit well below 1% at a microscopic 0.6%—but airlines getting in the black is the first step for attracting capital again and getting on a firmer financial foundation.
- Cloud Nine: From improved booking technology to enhanced cargo loading practices to intelligently delivered efficiencies, the air cargo industry has a lot to be proud of after the last three incredibly tough years. There is an air of optimism among airline executives who have not been able to put on airs for three years due to passenger losses!
Carriers Lack Capacity to Control Capacity
- Much was said in the summer of 2022 about ocean carriers managing their capacity to establish a higher floor for rates, thus establishing a more profitable baseline. Much was also said about the new-found market discipline on display by carrier alliances. And now rates from Asia to the US and Europe are headed to the dismal swamp of 2015-2019 breakeven levels. Here’s what the _____ happened:
- MSC and CMA-CGA increased their fleet by over 7% in 2022…check.
- The industry has ordered new vessels, due to come online in 2023-24, capable of moving almost 7 million TEUs…check.
- Container demand has dropped more than 20% in three months…check.
- Rates, which ALWAYS rise before Chinese New Year (a 12% average increase for the 10 weeks before the holiday over the last decade), have fallen 27% since November…check.
- Scrapping? We don’t need no stinking scrapping! …Check.
- Mothballing vessels? Maybe next week! …Check.
- While ocean carriers have been blanking sailings at an impressive clip, they seem determined to get that last squeeze of juice out of what looks more and more like a lemon of a market. The race to breakeven rates feels out of control, with carriers using low prices to fill weekly sailings without a controlled view of future profitability.
- Oh, and Drewry tells us to expect about a 20% increase in effective capacity when global supply chain congestion ebbs and ebbing it is! 20%!
- Shippers and forwarders should be very worried about the likely capacity management solutions coming in 2023. It is very hard to imagine a scenario that does not include many service cancellations and vessel removals.
- Carefully calibrated supply chain designs will be scrapped (pun intended?), and average transit times could well lengthen when fewer vessel strings and/or vessels are moving cargo each week.
- Speaking of transit times, the other desperate weapon in the carriers’ arsenal is slow steaming—which reduces the effective capacity for obvious reasons. Since we all have grown accustomed to abnormally long transits (thanks to infrastructure congestion), the carriers better slow those vessels now! Hey, at least carbon intensity comes down!
- It is truly a sad moment to be rooting for less efficient, poorly configured supply chains when your job is to elegantly design solutions with the brilliant shippers who read this!
