Featured Headlines:
2024 Sugar Import Quotas in the Raw
HSU-ge Updates Coming Your Way!
It’s a Dog-Eat-Dog World for Imports
USDA Organic Rule Marches On
- The U.S. Department of Agriculture (USDA) published the Final Organic Rule Primers, which is a guide to help the trade community understand the new import electronic organic import certificate, as well as other requirements of the new Organics Rule.
- The new Strengthening Organic Enforcement (SOE) Final Rule will reduce the number of uncertified entries, require use of electronic import certificates, strengthen recordkeeping and supply chain traceability, and strengthen oversight of accredited certifiers.
- The biggest change under the SOE is that more operations in the organic supply chain will need to be certified organic.
- The new rule will take effect in March 2024.
2024 Sugar Import Quotas in the Raw
- Last month, the Office of the U.S. Trade Representative (USTR) announced the tariff-rate quotas (TRQs) for imports of raw cane sugar into the United States during fiscal year (FY) 2024. For any intelligent readers needing a refresh, FY 2024 runs from October 1, 2023, until September 30, 2024.
- Additionally, the TRQs for certain sugars, syrups, and molasses (refined sugar) that may be imported into the U.S. have also been established for FY 2024.
- The changes made by this notice are applicable as of July 19, 2023.
- For additional information—or to indulge your sweet tooth—please refer to the official Federal Register Notice (2023-15295).
HSU-ge Updates Coming Your Way!
- U.S. Customs and Border Protection (CBP) advised that Harmonized System Update (HSU) 2308 was created on June 30, 2023; and contains 855 ABI records and 178 harmonized tariff records.
- Per CBP’s announcement, the update “contains modifications mandated by the 484 (F) Committee, the Committee for Statistical Annotation of the Tariff Schedules, effective July 1, 2023.”
- Click here to review the specific modifications listed in Version 9 of the 2023 USHTS.
- For additional guidance from CBP, please refer to CSMS #56816173.
- Any questions? Feel free to reach out to our compliance experts!
It’s a Dog-Eat-Dog World for Imports
- The Center for Disease Control (CDC) has announced that they are extending the current import restrictions of dogs from countries with high risk of enzootic rabies by an additional year.
- As a result, the current import suspension of dogs—which includes dogs that have been in countries considered to be at high-risk of rabies virus variants within the previous six months—will be extended through July 31, 2024.
- Commercially imported dogs must arrive at a U.S. port of entry with a CDC-approved animal care facility.
- Click here to review the list of CDC requirements.
Too Much Red For Yellow
- According to many media outlets, Yellow Corporation—the nation’s third largest Less-Than-Truckload (LTL) carrier—has shuttered operations and is headed for bankruptcy.
- Founded in 1929 in Nashville, Tennessee, Yellow acquired the YRC Freight, New Penn, Holland, and Reddaway brands over time and once moved over 50,000 shipments per day—though that number recently declined significantly as customers left in droves.
- As a result of this historic failure, 30,000 employees (including 22,000 Teamsters) will be out of a job.
- Yellow recently sued the Teamsters union, claiming that their refusal to negotiate a deal was responsible for Yellow’s commercial woes. As you might guess, the Teamsters denied that entirely and pointed to mismanagement as Yellow’s primary flaw.
- Known for its low prices, Yellow was $1.5 billion in debt, with over $700 million of that owed to the US Government alone. Yellow had received a somewhat infamous pandemic-era government bailout.
- So, intrepid shippers, not only will you pay more for LTL, but you will also end up paying higher taxes to cover Yellow’s loan, PLUS interest. Sweet deal!
Taking Inventory of Inventory
- After enduring the longest average ocean transits in history while trying to keep insatiable American consumers fed, US importers bit off quite a bit more than they could chew in 2022. The result was nearly $1B of excess wholesale inventories.
- The US Census Bureau indicates that the good news is that today’s inventory levels are down 3% from November’s crescendo, but the bad news is that year-over-year (YoY) monthly comparisons are still running at least 4% higher through July.
- While many shipper surveys indicate steady destocking successes, an estimated 71% of importers will receive less international cargo in 2023 versus 2022. So, THAT’S why we brokers and forwarders can’t make a living this year!
- Not surprisingly, experts anticipate total US trucking tonnage to decline this year as well. This is also why analysts expect Yellow’s former customers will find a new home for their cargo fairly easily (though at higher rates).
- Destocking efforts are hobbled by cautious consumers, burdened by record debt, frightened by inflation, and without governmental stimulus.
- Armada Corporate Intelligence estimates that 61.5% of US businesses remain overstocked, with 23.7% “effectively balanced” and 11.3% understocked.
- Like those eight persistent pounds we gain when “overstocking” during the holidays, the merchandise bloat is slow to shrink.
- As you might imagine, not all industry verticals were created equal when evaluating inventories. The US apparel industry has been made to wear a funny hat and stand in the corner, for example.
- The industry crushed its previous record volume in 2021 only to import 11.3% more in 2022! After buying nearly 2 million TEUs of clothes and footwear, the apparel folks face a record glut of unsold goods. (But wait…it gets worse…just keep reading!)
- US apparel sales at wholesalers are down 16% YoY, and the inventory-to-sales ratio at apparel wholesalers sits around at about 350%. Hanger in there, apparel industry!
The Global Grab Bag
- After Russia perfunctorily abandoned the safe export shipping pact, Ukraine’s President Zelenskiy quickly appealed to NATO for security support in the Black Sea and along the Danube River.
- Turkish president Recep Tayyip Erdoğan—who has helped persuade Russian president Vladimir Putin to stick with shipping agreements in the past—has also been tapped by Zelenskiy to see if he can get Putin to change his mind. Erdoğan is due to meet with Putin next month. (It has yet to be announced if they will be wearing shirts…!)
- Ukraine’s top ports have endured steady bombardment since the breach of the pact, and there are reports of drone strikes along the Danube, which is the secondary cargo routing option for the Ukraine.
- For its part, Russia’s Federal Security Service (FSB) has blocked at least one foreign cargo ship after accusing it of supplying Ukraine with explosives. It looks like shipping disruptions may not be limited to Ukraine and Russia, as regional hostilities increase.
- The US Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Danish monolith, Maersk Line, to pay a seaman over $450,000 in back wages, interest, compensatory damages, and punitive damages.
- The mariner was terminated after he reported numerous safety concerns about a Maersk vessel to the US Coast Guard.
- Maersk is rumored to be going through a rough patch after their public break-up with MSC, and they just weren’t feeling like themselves when they fired the whistleblower. Wait a second, this is pure nonsense and preposterous… sorry!
- As we read (and read) about new vessel purchases for just about every steamship line not named Yang Ming, this spells significant trouble for the vessel charter business.
- In its July Horizon report, Maritime Strategies International (MSI) says it expects the erosion of daily hire rates and reductions in time-period commitments that has already impacted charter party agreements for smaller containerships to spread to mid-sized and larger vessel fixtures.
- Weak shipper demand is part of the story, but it is also true that while the new vessel orderbook is long, it is also giant. The vessels coming off production lines are mostly in very large classes.
- This means that mid-sized vessels will be cascaded from main lanes to secondary lanes—even if those lanes don’t have the volume to support those larger assets.
- When slow steaming and scrapping cannot effectively cull excess capacity, the ocean carriers stop answering the phone when the charter business calls, especially late at night when the charter business has had that extra glass of wine.
- Mundra Port, India’s top container handler, continues to grapple with cargo backlogs created during cyclone-related supply chain disruptions that began last month.
- The delays inevitably put cargo owners at considerable risk of additional port-related charges, especially demurrage and detention.
- Unfortunately, long-dwelling import or export boxes facing hefty penalties often run the risk of being abandoned by cargo interests, principally in the case of low-value cargo.
- Sadly, during times of so much economic uncertainty, these abandoned containers stand very little chance of adoption from their cargo orphanages. Darn it, there we go again with an absurd claim! We apologize to our loyal and (quite) patient readers!
Transpacific Roller Coasters
- After the emotional rollercoaster of the ILWU Canada going on strike at least twice, and calling it off at least three times (!), the steamship lines have pounced on the resulting congestion and chaos to increase blank sailings! Weeee!
- While overall blanking blanks crested in Jan/Feb at 30% and slowly decreased to about 10% in June, we’re back to around 15% today.
- Well, what happens when one ride is closed for repairs? Yup, we all stand in line for whatever attraction is open for business! That means that shippers utilizing Canada for IPI destinations have flocked to the LA West and NY East coasters.
- Those shrewd carnival owners in the steamship industry have noted those long lines and full vessels, and they have significantly propped up shippers’ costs of admission. Yay!
- After hitting a six-year low in mid-June, transpacific spot rates have risen three times and are now 40% higher for the east coaster and almost 80% higher for the west coaster! We haven’t seen spot rates this high since October 2022—the end of the Covid surge.
- Since new contracts went into effect this Spring, those carnival-owning carriers have allowed BCOs unlimited rides, provided they paid their contract rates and kept their hands inside the cars. Today, BCOs are limited to their allocated number of rides per week, and they may even be punished for those carefree shipping weeks and months of yore.
- Can this somewhat rigged game persist? Who has the advantage in the great amusement park we call international shipping? We’re glad you asked!…
- If we imagine that the ILWU(s) will not throw a wrench in any of the most popular rides—and if we further PRAY that all vessels travel in the right direction through canals—it is hard to see major problems on the horizon for off-port vessel congestion, on-port container congestion, or overall supply chain chaos.
- And, what of those displaced orphans, the re-routed shipments? It seems safe to say that most of them will return to riding their favorite coasters over time. The demand spike in LA and NY should fizzle, despite the fact that NY was the home of America’s first roller coaster in 1884, Coney Island’s Switchback Railway!
- The steamship lines have already slowed their vessels while also expanding service loops to decrease costs while accommodating new capacity. How effectively can they provide reliable service if they turn to yesterday’s blanking levels? Not well.
- MSC and CMA-CGM, already behemoths, are scheduled to accept 500,000 TEUs of capacity in the last six months of 2023. Youch! Cosco, Hapag-Lloyd, and ONE are not all that far behind.
- Of course, not all of this capacity is destined for The Transpacific Water Park; however, 500,000 TEUs represent over 20% of the transpacific’s current monthly capacity.
- With long service loops and roundtrip transits, especially to and from the USEC, notably longer than 30 days, we don’t mean to suggest an immediate 20% supply increase; however, the order book is huge, loyal reader.
- It begins to look like the cost of amusement park admissions, no matter your coaster, will soon decline—though likely not as low as June. It may not be exactly a roller coaster of love (say what?), but shippers are in the right seat.
