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Six Tricks of the Forced Labor Trade
Six Tricks of the Forced Labor Trade
- As previously covered in ShapTalk, US Customs and Border Protection (CBP) outlined (6) six new forced labor requirements for Tier II or Tier III Customs-Trade Partnership Against Terrorism (CTPAT) members at the 2022 Trade Facilitation and Cargo Summit.
- CBP gave existing CTPAT members a one-year grace period to implement these conditions; however, prospective members were required to meet the requirements when applying to the CTPAT program effective August 1, 2022—which include:
- Risk Based Mapping—ensure the supply chain is free from the use of forced labor.
- Code of Conduct—create a statement that represents the partner’s position against the use of forced labor within any part of their supply chain; this must be uploaded to the CTPAT online portal and published publicly.
- Evidence of Implementation—provide CBP with evidence of implementation of their social compliance program.
- Due Diligence and Training—provide suppliers with social compliance program requirement training that identifies the specific risks, as well as help to identify and prevent forced labor in the supply chain.
- Remediation Plan—maintain a remediation plan for the organization in the event forced labor is identified in their supply chains.
- Shared Best Practices and Path Forward—share best practices with the CTPAT Trade Compliance program.
- Officials also revealed that the forced labor requirements set forth in the Minimum Security Criteria (MSC) will change on January 1, 2023; specifically, Section 3.9 of the MSC, which currently states that “CTPAT Members should have a documented social compliance program in place that, at a minimum…,” will change “should” to “must.”
- If you have any issues or questions related to the new requirements, check out this helpful FAQ guide from CBP.
- For more information regarding CTPAT, click here.
Is It Too Good To Be Wood
- The Department of Commerce has extended the deadline for importers and exporters to submit certifications for hardwood, plywood and veneered panels from China by an additional 80 days. Certifications are now due to Commerce by December 1, 2022.
- In order to qualify for the extension, the products need to have been assembled in Vietnam and imported in the US between June 17, 2020 and August 28, 2022.
- Registered ACESS users can find additional information here.
Biden to the Rail Rescue?
- At the eleventh hour, it looks like the White House may have served as midwife for the birth of a deal between US rail workers and ownership. It is unclear if the deal is solid or just an interim measure to buy a little time. It’s also unclear if Biden is a licensed midwife.
- Since 40% of long-haul cargo moves by rail, a domestic rail strike would cost the US economy approximately $2 billion a day, while instantly creating a trucking shortage/crisis— among other delightful downstream effects (like losing all running water, electricity, and food).
- In his speech, the President promised, “better pay, improved working conditions, and peace of mind around their health care costs” for rail workers. Biden also pledged that ownership could “retain and recruit more workers for an industry that will continue to be part of the backbone of the American economy for decades to come.”
- Because the new deal has not been ratified by union members, the White House also added another cooling-off period of several weeks to keep workers on the job for now.
- The main sticking points center around working conditions, tough schedules, and a diminished workforce. Pay raises within the deal are expected to be 24% through 2024, with 14% backdated to 2020 and available to workers immediately.
The Outbound All 'Round
- Where’s the beef? In containers leaving the USA, y’all! Beef exports have topped $1 billion per month for seven of the first eight months of the year; and year-to-date (YTD), the value of beef exports is up 29% vs. 2021. That’s a whole lotta MOO-la!
- While none of us can comfortably remember Silence of the Lambs—exports of mutton, honey, are up 82% by value and up 94% by volume. Though the total export business is only a bit more than 10% of the total beef trade, that is some “ewe inspiring” growth, readers!
- Though bacon is delicious, and even vegans have bacon substitutes (yes, you do), efforts to sell Wilbur have been ham-fisted at best. The value and volume of pork exports are down about 15% YTD, though the overall business will be worth $2.5 billion for 2022.
- As part of the Ocean Shipping Reform Act of 2022 (OSRA22), the Federal Maritime Commission (FMC) has issued a notice of proposed rulemaking (NPRM) that seeks to prohibit ocean carriers from unreasonably refusing to deal or negotiate with respect to vessel space accommodations. The FMC has also announced plans to double the number of acronyms in the shipping business by the end of 2023. LOL (get it?).
- In all seriousness, the proposed rule stems from numerous complaints by shippers, then documented by the FMC, that reveal a pattern of ocean carriers exhibiting commercial prejudice against US exporters as carriers show preference for lucrative import business.
- While ocean carriers have pointed to COVID trade shocks to explain the statistical evidence of declining available export liftings, the FMC said, “…largely these changes can be explained by carrier operational decisions based on equipment availability and differential revenues from import and export transactions.”
- Let’s face it, the US is somewhat obsessed with gold medals. And, this month we have moved into gold medal position for liquified natural gas (LNG). It may not sound like a sexy event, but LNG is pure gold financially. Whatever the heck this means, we can now export 11.1 billion cubic feet per day. Go Team USA! Eat our dust, Qatar and Australia!
- Our pathway to LNG greatness was tremendously improved by the Calcasieu Pass LNG export terminal getting all of its liquefaction trains in service ahead of schedule. The terminal is in Cameron Parish, Louisiana—aka the Pelican State. Unfortunately, as hard we tried, we just could not come up with a witty comparison between LNG and pelicans. Sorry, all.
- Three more projects in motion would push US potential for LNG exports up another 5.7 billion cubic feet per day, which would essentially increase today’s production by another 50%.
The Worldwide Joyride
- In an effort to deter China from invading Taiwan, the United States is considering several options for sanctions. At the same time, the US and Taiwan are also applying heavy diplomatic pressure on the European Union (EU) to participate.
- China’s recent war games in the Taiwan Strait have only escalated tensions—and it appears certain that any new sanctions will target commodities needed by the Chinese military, such as sophisticated telecommunications equipment and computer chips.
- Dock workers in Felixstowe, the United Kingdom’s (UK) largest container port, have announced a second eight-day strike planned to commence on September 27th. A whopping 82% of the Unite union indicated the management could ignite the 7% offer and toss it in the fireplace. Well, that isn’t actually verbatim, but you get the idea.
- Now that stevedores have organized strikes in both Liverpool and Felixstowe, UK’s trucking sector finds itself without enough work for thousands of workers. Roughly 4,000 pick-ups and deliveries cannot be executed for every day the UK’s two largest ports are closed. UK ports will also close to honor Queen Elizabeth’s funeral on September 19th.
- Having watched those Far East rates tumble, we bet all of you have been donating money to the ocean carriers to keep them afloat, right? Well, stop sending them dough, gang, the fat cat carriers have a new golden goose meets a cash cow that married a bull market.
- According to Alphaliner, ocean carrier profits for Asia-US are down to just $0.60 per FEU per nautical mile (nm) after being $1.26 per nm as recently as July and over $2.00 at the peak of the peak. Well, guess how much profit per this kind of mile per that kind of container these crafty ocean carriers make from Europe to US? Well, guess! Yes, it is $1.90 per nm, you nailed it.
- The only problem with the strategy of moving larger vessels to the Atlantic is that the extremely high cost of energy is making the cost of European goods much higher than substitutes from other markets. German exports have already been shrinking, and we anticipate inflationary headwinds for European exports through next year.
- As part of a long-range plan to ease congestion, the Long Beach Harbor Commission has approved an essential $170 million channel deepening project; and the Federal Government will pick-up 36% of the impressive tab. After work is completed, Long Beach will be able to accommodate vessels larger than Planet Earth itself, which is very hard to conceive.
- Okay, okay, but the project does include the deepening of the Long Beach Approach Channel to 80 feet, while easing turning bends along the Main Channel by deepening a wider area there (among several other dredging plans).
The Air Apparent
- The international air cargo market has been remarkably stable over the last two weeks though 2022 volume levels continue to trail 2021 by about 10%. Due to fuel increases, rates are essentially on par with 2021, though increased passenger traffic will continue to increase overall cargo capacity.
- Can one fly upstream? If so, that is exactly what the Latin American air market is doing! In July, the region grew almost 10% YoY.
- Get ready for a world of air passenger stats, oh the joy! Total air passenger revenue kilometers (RPKs) are up 58.8% vs. 2021, with domestic RPKs up 4.1% and now at 87% of pre-pandemic levels. While international travel RPKs are up an impressive 150.6% YoY, they still trail pre-pandemic realities by 32.1%.
- The broadest measure of airline business efficiency is average load factors, and we are glad to report a highly respectable 83.5% industry-wide, with North America leading the pack at 88.2%. We’ll try not to think about why “load factors” would be higher for the US, Canada, and Mexico!
- The UAE has approved the license for an all-electric cargo plane, the first of its kind for the Middle East region. According to local authorities, many pallets of cargo have been slowly inching toward jet-fuel fueled jets parked nearby.
- Germany will be selling a $458 million stake (roughly 6.2%) in Lufthansa after the airline was able to repay a pandemic bailout of EUR 9 billion.
TransPacific Specifics
- Despite the stunning beauty of the (suspension) bridge itself, CMA CGM has announced the suspension of its Golden Gate Bridge service; this is the sixth such service suspension in the last two months—though we believe this is the only such service named after a bridge.
- So, as we sigh with relief when viewing blank sailing (the omission of one sailing in a service) reports, we should now be watching the removal of entire service strings as we monitor supply-side ocean carrier moves.
- Why are carriers manipulating supply so aggressively? We are so glad you asked, dear reader! Demand has fallen off a cliff in the last month, and none of the carriers want to see the decaying profit carcass at the base of that cliff.
- A rule of thumb for carrier health is the 90% mark for average vessel load-factors or when you see them popping expensive champagne at lunch. While we lack data on cork-popping, the Pacific Southwest (primarily LA/LGB) lane is now frequently in the high 80’s for load factors. After over 100 weeks above 95%, current East Coast average sailings sit between 90-95% full.
- In four weeks, Asia-US West Coast rates have slipped almost 30%, with East Coast rates—more resilient this summer—falling 15% since September 1st. Youch!
- Even before the expected rail strike, on and off-dock rail congestion has taken over as the primary dysfunction in the US supply chain. For the Los Angeles area, off-dock rail dwell times are 40 days! Look gang, a Momma mouse can have two generations of offspring in 40 days, and the matriarch of the kangaroo court has a joey-laden pouch in 40 days.
- Los Angeles is bragging about only 12 vessels at anchor, but a closer look reveals about 50 vessels slow steaming or drifting just outside the harbor zone. With Savannah, New York, and Houston stuck between 20-40 vessels waiting for a berth, our problems with chronic congestion are hardly over.
- As the market softens, ocean carriers are under steady pressure to offer more free time on-port and off-port. Because of recent equipment imbalance woes, the carriers have yet to relent regularly on the allowance of days. It is hard to say if this continues to be about equipment or more about the staggering profits created by demurrage and per diem.
- Who the Hell really knows how much a rail strike will impact ocean prices? Who the Hell really knows if service terminations will impact ocean prices? Would the PMA please sweet talk the ILWU and at least put our largest fear to bed?!
- So, if the rail workers accept their record wage increases, the steamship lines don’t terminate 50% of capacity, and the ILWU/PMA squabbles end well, we should soon see 40 footers for under $7000 to the USEC and under $3000 to the USWC. What is this… mid 2020?! The fact of the matter is that rates are still about double the levels of 2019, and we must note relative rate levels at all times, supply chain students!
