Featured Headlines:
Riding Out Current Transpacific Trade Currents
US Officials Add Dozens of Chinese Textile Companies to the UFLPA Entity List
A Kaleidoscope of Russian Seafood Sanctions
Yippee…Census Clarifies USPPI and Other FTR Filing Requirements!
No Matter the Route, Ocean Carriers Count Their Loot
Tariff Trump Card(s)
- Disclaimer: Sadly, the first “trump card” is our inability to have in-depth, rational, unemotional discourse seemingly on any subject today. So, please read this article as a factual summary of likely pathways for President Trump to increase import tariffs. Please also celebrate our attempts at quirky goofball humor as we try hard to make sometimes dull subjects a bit spicier!
- No matter your political bent, it is almost comically easy to describe Trump’s public comments on tariffs as bendy, flexible, and as variable as Florida weather.
- Since our very livelihoods depend on it, our native OCD depends on looking at the first Trump term (and Biden’s choice to largely accept tariff status quo), weighing comments made on the campaign trail, and understanding the legal-legislative landscape.
- Let’s presume that since we have been managing trade since (call it) 2018 with 232, 301, and notable exclusions (many temporary), we all have a firm grasp of the status quo.
- The campaign trail was littered with variable thrusts on trade, but it sounds like we may see 60% additional tariffs from China and 10% from the EU. With luck, this is a worst-case scenario, and with more luck, many products will be at least partially excluded.
- You’ll now see why we offered a disclaimer. Seatbelts on, gang, the next bullet is an editorial offering and does not reflect Shapiro’s position! Oh, the tension!
- With inflation and immigration top of mind, it may be unwise to apply heavy taxes to food, toys, apparel, lower-end appliances and furniture, etc. It may also be difficult to count on a US manufacturing revolution without an immigration policy that excludes the bad guys while providing a route for a future US melting pot as prodigious as our previous ones.
- So, let’s look at the available increased tariff pathways:
- Executive Order #1: Under Section 232 of the Trade Expansion Act of 1962, the President can declare a national security or emergency threat to impose tariffs.
- Executive Order #2: Under the International Emergency Economic Powers Act (IEEPA), the President can effectively declare an economic disaster as the justification to impose tariffs. We just wish the act also limited the length of the names of acts and their acronyms!
- Trade Act of 1974: This is where we see our old friend, Section 301. Under the purview of US Trade Representative, the act provides for investigations of trade practices that could be deemed “unfair” to the US.
- “Regular” Tariff Implementation: This is the familiar process of proposals, public comments, and the potential of new legislation and/or amendments to policy.
- As you may guess, intelligent newsletter consumer, #1 and #2 above can occur very quickly indeed. One could imagine Presidential action in hours or days followed by implementation within months. It is somewhat unclear just how much justification is required, but the term “executive order” certainly implies plenty of power. We also saw just how much more quickly and cleanly Section 232 action occurred in the recent past.
- #3 is a longer path, and a thorough investigation would require input from a long list of stakeholders; this might take a year or so to implement.
- Has anybody else noticed just how little spice and quirk we’ve been brave enough to attempt?! Well, here goes. Love him or hate him, ain’t no way #4 is happenin’!!
Riding Out Current Transpacific Trade Currents
- Blame it on the rain…and the 160 mph winds! While China endures an average of 23 typhoons making landfall each year (!), this fall’s “crop” is just plain skeevy or gnarly depending on your brand of slang. Slow-moving menaces packing a powerful punch!
- September’s Yagi (which means goat, goatee, or fancy antenna) was followed by October’s 10-day Kong Rey (thanks a lot for the mountainous name, Cambodia!), and now we have the enormous Yinxing, which will miss Hong Kong to the south and take aim for central Vietnam. We hate to reveal this in public, but Yinxing means “ginkgo seeds.”
- Combined with the displacement of the vessels made to wait patiently for the ILA mini-strike, steady yet pernicious blank sailings, and the reassertion of East Coast volumes on East Coast services (after some vacationing via the West), sailing schedules are beyond MUBAR (“messed-up beyond all recognition” G-rating style).
- Yeah, yeah, but what does it mean for pricing?! Okay, children… we’ll stop at the next exit for a potty break, and we’ll cough up the trends.
- USWC pricing has been as stable as a barn full of 20-something horses, but a wilder ride and redcoats are coming, Mr. Paul Revere!
- We see buy opportunities in November followed by lots of fears spooking the market, the horses, Paul’s ghost, and the price of containers beginning in Dec.
- Wild horses shouldn’t take you away from this story, gang: We all fear the next ILA saga, Trumpian tariffs, canucked up labor in Canada, and the annual CNY horse race fittingly welcoming the Year of the Horse. Psych! Man, that would have been SO perfect, but we’ll have to wait for 2026 to saddle up for that Horse.
- It is a snake in ‘25, valiant reader. A slithering, slimy, spiteful, savage serpent!
- Heading back East, we see all the fundamentals for rate decreases, but those vessel load factors are high because of the painfully delayed sailing schedules we already mocked,
- The question becomes, how attractive are rates and routings headed directly into a typhoon of joy as the USMX and ILA enter the ring again before the Jan 15th deadline.
- We do apologize for so much horsing around, and we hope the people of the Philippines and Vietnam recover quickly from the damaging winds delivered by Ol’ Ginkgo Seeds!
US Officials Add Dozens of Chinese Textile Companies to the UFLPA Entity List
- The US Department of Homeland Security (DHS) recently added 78 Chinese-based textile companies to its Uyghur Forced Labor Prevention Act (UFLPA) Entity List.
- Effective November 1, 2024, US Customs and Border Protection (CBP) will apply and enforce a rebuttable presumption prohibiting goods produced by the following from entering the US:
- Esquel Group
- Guangdong Esquel Textile Co., Ltd.
- Turpan Esquel Textile Co., Ltd.
- Originally introduced in 2021, the UFLPA Entity List identifies companies that are at a higher risk of engaging in forced labor across various industries—including apparel, agriculture, polysilicon, plastics, chemicals, batteries, household appliances, electronics, seafood and textile products.
- The latest announcement reinforces the ongoing DHS Textile Enforcement Plan, which supports the Forced Labor Enforcement Task Force (FLETF) with its efforts to ensure importers comply with UFLPA requirements.
- For more details, please refer to the DHS press release.
- Bottom line? Use the force; but not the forced labor. Contact Shapiro today to learn more about the benefits of performing regular audits on your supply chain.
A Kaleidoscope of Russian Seafood Sanctions
- The NCBFAA’s Regulatory Agencies Committee (RAC) asked U.S. Customs and Border Protection (CBP) to clarify Russian seafood sanctions for broad Harmonized Tariff Schedule (HTS) categories that fall under the Office of Foreign Assets Control (OFAC) ban.
- Customs brokers have faced confusion about whether products like tilapia fish sticks– classified under the same HTS code as the sanctioned species—also require self-certification.
- CBP issued a response to confirm that all species within these HTS codes need a signed self-certification to be uploaded to the Document Imaging System (DIS).
- Customs brokers should review and adjust compliance processes to ensure all required self-certifications are accurately completed for products in any listed HTS subheading, regardless of the specific fish species.
Yippee…Census Clarifies USPPI and Other FTR Filing Requirements!
- The US Department of Commerce (Commerce) issued a proposed ruling to clarify, amend and expand the scenarios related to the US Principal Party in Interest (USPPI) for goods that enter the US for consumption or warehousing, and then are stored in a warehouse, storage facility or admitted into a Foreign Trade Zone (FTZ) prior to export.
- The current Foreign Trade Regulations (FTR) allow the Customs broker to be the USPPI when they or a foreign person is listed as the importer of record (IOR). However, this may no longer be as practical when goods have been stored in warehouses, storage facilities, or FTZ for an extended period of time after entry.
- In many cases, additional parties other than the customs broker have knowledge and control of the goods for weeks, months or years and possess the goods in warehouses, storage facilities, or FTZs. Based on knowledge and control of the goods destined for export, Commerce is proposing that the warehouse, storage facility or FTZ should be considered the USPPI in these scenarios.
- Additionally, Census is proposing to amend several sections–including FTR definitions, mandatory filing requirements, responsibilities of parties to the export transaction, confidentiality, penalties, and voluntary self-disclosures to ensure clarity, accuracy and consistency.
- The following is a non-exhaustive list of questions and details to be considered when proving feedback to this ruling; however, any pertinent information not already included is certainly welcomed.
- Describe the potential value of clarifying who is the USPPI when goods enter the United States for consumption or warehousing, and then are stored in a warehouse or storage facility or admitted into a FTZ before being exported.
- Describe the potential value for all other changes to the FTR.
- How long would a company that utilizes or manages proprietary software need to make programming changes to potentially adapt to the changes in this proposed rule and interface to the AES?
- Are there business practices that a company would need to implement to come into compliance with the changes in this proposed rule? If so, how long would a company need to implement new business practices?
- Comments can be submitted via the Federal eRulemaking Portal and/or by e-mailing [email protected].
- This rulemaking is listed under RIN number 0607-AA62.
- All comments received are part of the public record; however, officials will not make the data available for public access until the comment period has officially closed.
- Please Note: This is not a final rule; and does not include any immediate changes to the FTR at this time.
- For a full list of proposed changes covered by this ruling, please refer to the Federal Register Notice of Proposed Rulemaking (Docket Number 241010–0268).
Oh Canada…Oh Dear!
- While most American shippers think of Vancouver and Price Rupert as standard routing options, it appears we should have kept Montreal in our sights as well, especially as we accumulate brilliant contingency plans in the event of an ILA strike in January!
- Without fanfare, Montreal handles over 2M TEUs of cargo a year which does pale a bit to Vancouver/Prince Rupert’s over 5M. But only ports named Los Angeles, New York, and Savannah are bigger than Canada’s Pacific coast line-up in North America!
- Well, all of them are on strike. What happened to the mild-mannered, calm, reasonable stereotype for our neighbors to the north?! We are counting on you cousins!
- In the west, the British Columbia Maritime Employers Association has locked out over 700 members of the local ILWU over an automation conflict at DP World Vancouver Terminal; the dockworkers have also been operating on an expired master contract since 2023.
- Similarly, back east in Montreal, the Canadian Union of Public Employees (CUPE) has walked out twice and boycotted overtime while screaming bloody murder over operations at Viau and Maisonneuve terminals (neither of which we can pronounce). CUPE workers, known affectionally as “Cupids” (not really) also have not had a new contract since 2023.
- As you might imagine, the ships are stacking up, the Canadian railroads are re-routing and almost completely avoiding both port complexes, and each day multiplies the congestion. At least for the PNW, 85% of those boxes are destined for the USA!
- The only silver lining here is that the strikes are happening now and not later in the year. With lots of luck and heavy government intervention, it seems possible that the Canadian international container infrastructure will be high functioning again by January.
- …Or will it?!
No Matter the Route, Ocean Carriers Count Their Loot
- Let’s all pause a moment and watch the ocean carriers at the poker table count their tall stacks of chips while investing several in ships…
- Maersk: The Danish behemoth made $3B in Q3. This profit rate beats a few insignificant firms like General Motors, Honda, Anheuser Busch, Lowe’s, and McDonald’s!
- ONE: The Japanese superstar has disappointed us all and will only make $3B for all of 2024. Come on, folks! Maersk is crushing you again.
- CMA: Well, at least the French have not yet begun to fight! On the strength of $2.7B profits in Q3, CMA still has a chance to defeat Maersk though MSC has almost certainly won the profit race long ago (we shall never know since MSC is private… and quite shy).
- Hapag: As Hapag, the lone major German, prepares for the Maersk marriage, she has bought a necklace of 24 beautiful dual-fuel (liquid natural gas) ships for a cool $4B. The over 300,000 TEU capacity upgrade represents about 15% of the carrier’s total.
- COSCO: The Chinese giant has invested in 28 dual methanol beauties which will increase their global fleet by over 500,000 TEUs; this even eclipse’s Hapag’s 15% gain. Oh, and COSCO has made almost $8B for the first three quarters of the year. They too will be (literally) giving GM and Mickey D’s a run for their money, this year!
- Alliances: The Gemini Agreement has been approved by the FMC, and the Premier Alliance (formerly The THE) is well on their way. Hey, we STILL think the Gemini Agreement sounds like a Jason Bourne movie, and if ANYBODY EVER names an alliance “The THE” ever again, they can expect a visit from a well-armed agent Bourne!
Trucking a la Modal
- As many companies are in budget mode and as we peer apprehensively into our murky 2025 crystal balls, let’s take a quick peek (peak?) under the trucking industry’s hood…
- Drayage
- While they never feel like #1, we international shippers count heavily on this segment and will need this “heart and soul” service all the more should we strive to effectively surf the expected container tsunami.
- Quietly, US import volumes are within a stone’s throw of Covid levels, but the growth has been incrementally gradual, and dray carriers have provided capacity, reasonable rates, and have nimbly covered unpopular categories like hazmat and heavyweight.
- The largest headwinds in this segment today are port congestion, its cousin port labor, and that potential cargo tidal wave we all “eagerly dread” (if that is possible!).
- Despite decades of discussion, we still pay dray drivers by the turn, and congestion is the ruthless enemy of port turn velocity.
- We often forget that gas prices are nearly 60% higher than 2020 since they are a bit more than 10% down year-over-year. Fuel costs constrict dray profits when the segment is mired in disruption-driven inefficiencies.
- Biden’s recent announcement of $3B of federal infrastructure funding headed for US ports should be good news for drayage. When our ports are humming along, you MIGHT just see a drayage driver crack a smile… we mean it IS possible!
- One of the biggest current concerns is the future of US immigration policy. Drayage is dominated by documented immigrant drivers, and it stands to reason that they will largely maintain their citizenship. However, opportunity costs may arise in other industries, and the pool of future drivers may shrink.
- Seatbelts firmly on in drayage, folks. We think it will feel more like 2021 than 2024 at least to start 2025! Not much positive mojo coming from the ILA, after all!
- Full Trailer Load (FTL)
- What a long, strange trip it’s been! What the FTL is going on! The broader trends for both capacity and rates are down and down, and that combo is never good.
- Since we international shippers have been so busy, it is a bit mysterious to understand why demand for FTL is so anemic though the capacity side is easy to figure.
- In a word, Covid. Covid “done did” this too! Is there anything we don’t lay at its deadly doorstep? Pricing jumped 60% on demand, and the capacity jump followed.
- The JOC runs a truckload capacity index which measures (ironically enough) the capacity of America’s largest FTL firms. Interestingly enough, the top 40 tuckers hold over 92% of national trailer load volume.
- After eight consecutive quarterly capacity decreases and the lowest capacity levels seen since 2014, Q3 2024 was about as close to a neutral reading as possible.
- For early-stage 2025 contracts, rates are up about 2% so there is a glimmer of hope. With the modest rate increases, does this hint that FTL hit the bottom of the downturn?
- We say yes! Yes, that’s all you get, intrepid readers!
- Less Than Trailer Load (LTL)
- With the rise (can we just say domination?!) of e-commerce, LTL has been flying high for all the yummy trucking metrics like prices, profits, and other p words.
- Yet, with Yellow’s demise in 2023 and industry consolidation, the stakes have never been higher for what the JOC calls, “the three T’s” for LTL. That’s terminals, talent, and technology!
- Interestingly, the current wave of mergers and acquisitions is affecting the smaller firms in the segment as smaller fish gobble up fellow size-challenged carriers.
- It is refreshing to see an industry responding proactively to competition while keeping an eye on future market needs and shipper realities.
- We think that this segment will be in solid condition with stable pricing backed up by improving service metrics.
- Longer term, however, we’ll see national players swimming in regional markets with regional players bolstering those three T’s to prey on bigger guys in their own ponds.
- Let the competition commence. All of this is good for shippers!
