Featured Headlines:
White House Russian US to Spring Clean
The 411 on Recent FDA Filing Changes
Far East Contracts Increased Distracts
White House Russian US to Spring Clean
- The White House marked the one-year anniversary of Russia’s invasion of Ukraine in quite a memorable way this year—it revealed that the US is increasing tariffs on certain Russian products!
- According to the announcement, the US will implement the following changes:
- Beginning March 10, 2023, a 200% tariff on aluminum and derivative-aluminum articles will be applied to Russian products.
- Effective April 1, 2023, import tariffs will increase to 35%-70% on more than 100 Russian metals, minerals and chemical products. Click here to learn more.
- Starting April 10, 2023, a 200% tariff will also be applied on aluminum and derivative aluminum articles in which any amount of primary aluminum used in manufacturing is smelted or cast in Russia. Click here to learn more.
- The Commerce Department also amended the Export Administration Regulations (EAR) to expand sanctions to more than 200 individuals and entities effective February 24, 2023.
- Nearly 100 Russian and third country companies were added to the Entity list to prevent targeted companies from obtaining items made in the US or containing US technology/software abroad. Click here to view the official Federal Register Notice.
- Click here to read more about the recently announced US actions.
The 411 on Recent FDA Filing Changes
- The US Food and Drug Administration (FDA) has issued further instructions regarding the expected deployment schedule for upcoming port of entry filing changes in the Automated Commercial Environment (ACE).
- According to the announcement, changes will be available for testing in ACE by March 3, 2023 (end of day). However, the ACE production environment is planned to officially deploy no earlier than April 15, 2023.
- For additional details, check out the Information for FDA Entry Filings.
- And, as always, feel free to reach out to our compliance experts if you have any questions!
The Rail Pail
- Union Pacific Railroad (UP) will end their fantastically, stupendously, unpopular chassis policy on May 1, 2023—you know…the one that leads to importers paying storage fees on ocean containers you aren’t able to access!
- The so-called “no cherry-picking rule” prohibits trucking companies from using private chassis, even when pools are as empty as … as empty as a missing metaphor!
- All other North American railroads permit truckers to use their own chassis, although they may charge a “flip fee” for doing so. The “flip” refers to when an ocean container is already loaded onto a pool chassis, but a trucker wants the box to be transferred to a private chassis.
- The “flip off” fee, on the other hand, is an innovative concept that shippers are closely considering; this fee charges rail ramps back for “flip fees” plus interest. Implementation scheduling is currently unknown.
- Canadian National Railway (CN) is focusing on building capacity to enhance on-time performance throughout its North American network, build resilience for cargo surges, and offer alternative options to the US West Coast.
- CN is investing in facilities in Milton, Ontario, and at inland terminals to increase capacity in the Midwest and on the US East Coast. And, as you would imagine, CN will continue to invest heavily in the Prince Rupert and Vancouver operations as well.
- CN will grow its capacity based on the assumption that China will remain the biggest sourcing country for North America, while acknowledging the sourcing shifts under way into Southeast Asia, India, and potentially Africa that could fuel cargo growth throughout western and eastern Canada.
- Based on Vancouver’s current woes with empty container and equipment shortages, CN better get focusing on all this focusing already!
- International intermodal no longer accounts for the majority of containerized rail moves in North America, as more importers embrace transloading to move products inland from ports. The shift from international to domestic intermodal has become more pronounced in the last three months.
- Gee…do you think waiting a week for a chassis and being charged demurrage of $10,000 per box has anything to do with it?! Well, do ya?!
- Ocean containers represented only 47% of all intermodal shipments between November 2022 and January 2023, while domestic moves accounted for 53%.
- BNSF Railway and J.B. Hunt are betting on transloading gaining even more popularity in the coming years. Last August, the companies launched a transload operation covering Seattle and Tacoma together. As most of you know, J.B. is the big bad wolf in this village!
- On the East Coast, transloading is also booming in port cities such as NY/NJ, Norfolk and Savannah. The difference is that most Eastern cargo is transferred into trucks due to shorter hauls to inland points.
The Export Ultra Short
- There’s been a bipartisan effort in the Senate to lift the Cuban embargo—11 million consumers, plus 4 million annual tourists might really enjoy American wheat, rice, corn, and soybeans!
- Oh goodie…American chemical manufacturers regularly export pesticides that are illegal domestically! The Centers for Biological Diversity and International Environmental Law have urged the Environmental Protection Agency (EPA) to at least require “environmental consent” from importing nations.
- US exports of crude oil and liquified gases have eclipsed 11 million barrels per day, which is more than the total production of either Russia or Saudi Arabia. Net imports of the same products have reached low levels not seen since the 1950s.
Airline World Tour
- Asia: in part due to Chinese New Year (CNY) timing, air cargo volumes are down about 20% year-over-year (YoY) in 2023. At the same time, capacity is up almost 9%, reflecting more robust passenger activity. While we witnessed some of the lowest rates in a decade in February, the market has heated up considerably recently—and rates have jumped accordingly.
- Middle East: while air volumes are down about 10% YoY, this is an improvement compared to market comps from Q4 2022. Capacity is also up about 9%. For those skeptics out there, Qatar Airways and Emirates are among the world’s five largest air cargo operations on Planet Earth…so there.
- Latin America: the little market that could! Latin airlines were the only region to grow with a solid 4.6% increase in chargeable kilos YoY. With a capacity increase of a whopping 34.4%, rates continue to drop, despite the demand uptick.
- North Pole: Santa reports 0.0 kilos of chargeable weight for 2023 YTD; this is a record two million Q1 cycles of zero growth or decline in a row. You didn’t think Santa was around for the dawn of mankind, did you?
- Africa: while volumes are down about 10%, capacity is also down nearly 2%. Passenger traffic has been slower to rebound in the region, but African cargo sits with Latin America in the high potential category for 2023.
- Europe: was made to stand in the airline corner during airline class! YoY volume decreases above 20% and a lack of dedication to homework are the main causes! Interestingly, cargo capacity is down almost 10%, thanks in large part to route shifts from the war in Ukraine.
- North America: finally, we look at the “home team” airlines. Since December, North American air cargo operations have been fed about 9% less cargo YoY. Air capacity has grown a meager 2.3% to date in 2023—but that is expected to increase considerably.
Far East Contracts Increased Distracts
- What does an ocean carrier do when spot rates are below costs just when annual contracts are due for negotiation and implementation?… Well?! Surely, you have a theory, scholarly readers!
- First, we bored all of you last week about supply “over-hang.” Essentially, when you note blank sailing levels of 20-25% and decent vessel load factors, it seems fairly clear that existing over-capacity is at least 20%.
- Second, we bored all of you last week about the new vessels probably coming on-line in 2023 and certainly by 2024. When viewed through the East Coast Prism—which is a cousin of the Bermuda Triangle—the 2023 capacity increase nears 10%. Even in the most robust years of demand growth, 10% would be a lot to cover.
- Do we have a robust growth year coming? Well, January and February would join forces to say “hayulllllllll no!” if they were raised in Georgia or Alabama.
- Imports into the US are down more than 20% in the first two months of 2023 vs. 2022; and if we look at this from Asia, the results are even less encouraging…roughly 25% down!
- So, why are steamship lines warning of a substantial general rate increase (GRI) for spot rates on April Fool’s Day in 2023? Is it because they think we are all fools? Yes! That must be the answer!!
- Well, fools, we expect a GRI of MAYBE $400 on April 1st, but the supply/capacity side of the equation does not hold together at all. Spot rates will rise a bit during April’s showers, but May flowers will witness more decreases.
- The problem as we see it is that ocean carriers losing money for a long cycle is bad for supply chain planning, truly secure space, transit times and trust. We can point out that short-term market increases are artificial, but we don’t have all the moral and ethical answers here. Drat!
- After collecting billions of acorns during the pandemic, and during a period of likely alliance shake-ups, maybe we shippers will get to play hard ball in 2023 at least. But, please remember the benefits of equilibrium by 2024, thoughtful shippers.
CMA-CGM-Momentum
- Speaking of acorns, French carrier, CGM CMA, made about $25 billion in profits for 2022, which gives them just under $43 billion since 2021. One might accuse the carrier of masting…ironically (one definition of “masting” is to produce an enormous crop of acorns… please look it up, skeptical reader!).
- So, has CMA squirrelled away their horde of crunchy profits? Absolutely not! The carrier has already invested about 90% of 2022’s haul on strengthening their balance sheet, new assets and broadening capabilities.
- These ambitious folks from France scooped up Fenix terminal in LA, a 9% stake in Air France-KLM, purchase orders for new freighter aircraft, a pending deal for two GCT terminals in New York and Marvin Gardens… all before passing GO or collecting $200!
- There are rumors of a deal with Shapiro—that reputable and intrepid broker-forwarder from Baltimore—to acquire our newsletter. Well, we ain’t sellin, loyal readers!
