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The 411 on Section 301 Tariffs
USTR Requests Comments For the Notorious M.C.P.
Goodness Gracious Great Balls Of Fire!
International Mix of Schticks and Tricks
The 411 on Section 301 Tariffs
- As you may already be aware, last week, the Office of the U.S. Trade Representative (USTR) announced that Section 301 tariffs would continue for List 1 and 2 products from China.
- The decision follows a May announcement from the USTR that informed companies that have benefited from Section 301 tariffs of the possible termination of the duties; it also asked representatives to request a continuation of the tariffs if desired.
- According to the notice, the USTR received 288 requests for continuation regarding List 1 products and 146 requests for List 2 products from domestic producers and trade associations, collectively.
- USTR officials will conduct an official review of the July 6, 2018 (List 1) and August 23, 2018 (List 2) actions in light of the requests for continuation; and it will publish additional Federal Register notices regarding next steps in the review process once determined. At that time, those interested in commenting on the extensions will be provided the opportunity to do so.
- Click here to view the official Federal Register Notice.
- If you have any questions related to Section 301 tariffs, please contact [email protected].
USTR Requests Comments For the Notorious M.C.P.
- The Office of the U.S. Trade Representative (USTR) is currently undergoing its 2022 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List)—which identifies examples of online and physical markets that reportedly engage in or facilitate substantially copyright piracy or trademark counterfeiting.
- The Notorious Markets List and is developed annually based on public comments entered through the Federal Register. As such, the USTR is requesting comments from the public that identify online and physical markets that should be included in the list.
- All comments should be submitted through the Federal eRulemaking Portal by the following deadlines:
- All written comments should be submitted by October 7, 2022 at 11:59 pm ET.
- All rebuttal comments and other information the USTR should consider during the review should be submitted by October 21, 2022 at 11:59 pm ET.
- Click here to view the official Federal Register notice.
Goodness Gracious Great Balls Of Fire!
- Safety, Shmafety! The emergency exemption for US truck driver hours of service rules (HOS) was extended until October 15, 2022. For certain commodities, truckers are permitted to exceed the industrywide limitation of 11 hours of driving per day. Coincidentally, interstate highway sales of coffee and toothpicks (for eyelid propping) have exploded as well!
- So, as you ship or receive livestock, animal feed, medical supplies, COVID-19 vaccines, groceries, paper products, gasoline, diesel, masks, gloves, hand sanitizer, and many other items, just know that truckers’ children and ours thank you for these hazardous highways!
- All kidding aside, the White House expects increased COVID-related absenteeism for all industries this fall, and trucking connections are crucial for certain commodity groups.
- The HOS exemption is highly likely to be extended well beyond October.
- US transportation and warehousing enterprises added 20,300 jobs during the month of August. Unfortunately, all of them were in the barista and first aid categories… you see, as truckers work 21 hours a day and all… see?
- Here’s another eye-opener for you—1.75 million Americans are now employed by the warehousing sector.
- US FTL trucking payrolls were up 8.4% year-over-year in July versus 2021, with LTL pay rates up 3.2%.
- Norfolk Southern Railway has been forced to open two auxiliary container yards in Memphis as imports surge into the region, primarily driven by volumes coming through Savannah. While the new yards create mind-blowing complications for shippers, here’s the “rub”—wet or dry, ribs or pulled—pork BBQ in Memphis is worth ANY wait!
- Interesting stat: The Georgia Ports Authority indicates that imports moving from Savannah to Memphis have increased by 72% year-over-year this summer!
- NEVER forget that global warming is fake news…The US Department of Transportation (DOT) has announced that over $500 million in emergency relief funds have been slotted for repairs to roads and bridges recently damaged by storms, floods, wildfires, and gigantic flaming balls of fire bouncing from state to state. See…we don’t just make up these titles, people!
WTO Asks WTF
- When asked about the chance of a post-pandemic global economic recovery, a World Trade Organization (WTO) spokesperson asked, “have you heard about the snowball’s chance in Hell, perhaps?” Fortunately, WTO Director-General Ngozi Okonjo-Iweala was present to offer a much more substantive response, though the gist is the same. She points to the following on-going headwinds for the global economy:
- Ukraine’s War with Russia;
- Supply Chain Inefficiencies;
- China’s Zero Covid Policy;
- Food and Fertilizer Crisis; and
- Extreme Weather Events.
- Okonjo-Iweala told Bloomberg, “We are in a risky environment. We are still in multiple crises and exogenous shocks.” Based on her bleak conclusion, it appears likely that the WTO will again downgrade projections for trade growth. This April, the WTO already decreased 2022 expectations for global merchandise trade growth from 4.7% to 3%.
- What is confounding about today’s economic challenges is how often one crisis entangles with another. As a result of the War in Ukraine, Russian gas may not be available to “fuel” German industry…the fertilizer shortage and extreme weather “feed” the food crisis… China’s Zero Covid response creates a real “ball and chain” for global supply chains…AND yes, supply chain bottlenecks “starve” farmers of cost-effective trade routes fast enough to get food to the hungry before it rots.
Err Fair For Airfare?
- Okay, okay, so global air cargo volumes are up about 4% over the last two weeks, but chargeable kilos year-on-year (YOY) are down almost 10%, and, thanks to increased passenger travel, capacity is up almost 10%. Yet, rates are UP 4%, gang. Thus, there is an err of fair in the realm of airfare.
- A closer look reveals that airline fuel is up 25-50% (depending on who you believe). Our investigative reporting and whistleblowing acumen need some work, after all. Rats!
- In a typical week, there are over 350,000 airfreight shipments ripping through the skies very quickly (or at least waiting endlessly for airports to get enough staff together to load, unload, and process the cargo).
- From a regional view, air cargo kilos are down considerably YOY from Asia, Southeast Asia (SEA), and the Middle East (ME). While capacity is down for Asia, it is up 13% for both SEA and ME. For these regions, the decline is seen more of a story about 2021’s impressive volumes than a notable downturn today.
- For North America outbound, the market has been remarkably stable for the last several weeks. Both capacity and rates have shifted by 0% with air volumes down just over 1%.
- Cathay Pacific has projected a very slow “peak airfreight season” with inflation, supply chain bottlenecks, unstable labor levels, and COVID in China all depressing factors for consumer demand (double meaning intended). Cathay’s general cargo manager, Frosti Lau delivered this frosty news. (What a burn!)
- While it’s nobody’s business but the Turks, Turkish Cargo (the freight side of Turkish Airlines) is now the largest air cargo carrier in Europe. Over the last five years, the airline has doubled its market share and is expected to move over 10 million ton-kilometers this year. Turkish Cargo has quietly emerged as the fourth largest cargo player on Earth.
- It’s a good time to negotiate air spot rates from China to the US. Spot rates of $6/kilo and lower are well within reach.
The Prophet's Profit Prophecy
- Typically, when we talk about banks, we talk about profits, but The Hong Kong and Shanghai Banking Corporation (HSBC) is auditioning for the role of THE World Prophet. The bank boldly estimated that steamship industry profits will decline by 80% by 2024.
- Given that steamship lines will have amassed $300 billion in profits since 2021 by year’s end, many shippers have donned lamp shades while singing Irish songs as they hug random strangers. Makes sense to us!
- From the macro level, HSBC anticipates global container demand to shrink by 2% this year and 3% next year. For 2024, the prophetic HSBC expects a demand recovery of 2.5%. The supply side is the bigger story: HSBC projects supply growth of 6-8% for each of the next three years.
- A closer look reveals the largest vessel order-book since 2009, with the equivalent of a full 27% of current global capacity arriving in the next three years. Based on upcoming carbon rules (and existing sulfur regulations), we should see more scrapping activity, but nevertheless, the coming supply spike is a steep one.
- Many industry analysts—especially the snooty ones from Europe—point to Chinese trade with the European Union (EU) as a barometer for future US demand. If so, European demand for Chinese goods is down just over 5% YTD versus the first eight months of 2021. Seatbelts on, kids!
International Mix of Schticks and Tricks
- As spot rates plunge, the ocean carriers who locked shippers into high-rate long-term deals for large minimum quantity commitments (MQCs) continue to make a killing, while the carriers who gambled on more commercial exposure to spot (with the expectation of a longer boom market), are only committing financial assault (not murder, you see). Hey, can we all PLEASE remember that rates are still double the levels before the pandemic?!
- The big question out there is just how enforceable long-term contracts could possibly be after last year’s deals were used as toilet paper during that weird supply shock that none of us will EVER forget. Many carriers have offered shippers “voluntary reductions” on contract base rates while offering a greater number of origins and destinations. Pass the popcorn, people; let’s all watch to see what happens when spot rates make bigger BCOs feel duped (yet again) by their shrewd ocean carriers.
- Speaking of feeling duped, UK dockworkers are planning another strike, this time in Liverpool, from September 19 to October 3. Ownership offered the stevedores a pay increase lower than 2022 inflation rates in Britain. A 20-year vet on the Liverpool docks commented, “_____ this, and ______ ______ _____ing bloody ____.”
- Typhoon Hinnamor recently hammered the coastal areas of South Korea and large portions of eastern China. The industry expects at least a two-day delay for departures from Ningbo, Shanghai, and Busan. The typhoon, apparently named after US shippers by the steamship industry, means “Price Moron” in English. We are 100% serious; the definition of “hinnamor” is “price moron” (look it up!) Serious disruptions to inter-Asia departures and arrivals could make price morons of us all for a week or two.
- Since global warming is fake news, this tidbit may lead to some heated debate and the blowing of smoke in unnamed locations: California officials have requested that ocean vessels do not plug into shore power while they look to reduce strain on the power grid as a record heatwave scorches The Golden State.
