Featured Headlines:
Violence in Yemen: US Strikes Houthi Rebels
The International Inquirer: Alliance Gossip
Trump's Reciprocal Tariff Plan: The Countdown to April 2
Explore the New Deep Blue CPSC Robot
BlackRock Down…in China’s Eyes
Violence in Yemen: US Strikes Houthi Rebels
- Over the weekend, the US lead airstrikes on Houthi strongholds in Yemen in the capital Sana’a as well as Hodeida, Bayda, and Marib. Some 53 Houthis died (apparently including five children) with more than 100 injured in the strongest counterattack from the West since Houthi aggression began in late 2023.
- Houthi Red Sea violence, justified as a protest to Israel’s conflict with Gaza, has resulted in two ships being sunk, the death of four sailors, and cargo losses in the tens of millions as most ocean carriers forego Suez routings and maritime insurance rates soar.
- In normal times, $1 trillion in goods pass through the region each year.
- To date they have attacked 100 merchant vessels and made 174 attempted attacks on US Navy assets, ships, and midshipmen.
- Yemen, a very poor nation of 34 million, has an average GDP below $700/year (compare this to $82,000/person/year in the US). In a stark comparison, the nuclear-powered USS Harry S. Truman, the center of US Red Sea military ops, cost almost $5B to launch, which is about 25% of Yemen’s annual gross domestic product (!).
- This is certainly a fight between the rich and the poor. While we can feel very bad for Yemen, it is difficult to feel bad for the Houthis, who do not govern Yemen and who provoked a civil war that killed 160,000 while displacing four million. Oh, and one of their primary “political” goals is to bring back slavery… unfortunately, no sarcasm here!
- The Houthi movement, officially called Ansar Allah, comprises about 200,000 people and emerged as a political force in the 1990s. As we all know by now, Iran directly backs Ansar Allah with money, arms, and training.
- As tens of thousands of Houthi protesters raged after the airstrike, their leadership pledged to “confront this criminal aggression by responding to escalation with escalation.”
- One thing about Houthi leadership, they sure can turn a beautiful phrase!
- While Sec of State Rubio says the US is “doing the world a favor,” the early reaction from ocean carriers and maritime insurers is considerably less positive.
- In the Danish press, marine pundits have indicated that the US action will only delay a return to normal shipping through the Suez by six months or more.
- Frankly speaking, with an end to the ceasefire in Gaza, and the Houthis’ own recent inflammatory rhetoric, it is hard to see how fighting back could possibly worsen matters.
- Oh, that’s right! With approx. 10% of global ocean “effective capacity” devoted to skipping the Suez, would regular access to the famous canal be good or bad for ocean carriers?
The International Inquirer: Alliance Gossip
- Big Breakup Alert: The 2M Alliance between MSC and Maersk has dissolved, citing irreconcilable differences after MSC’s prolonged spending spree and Maersk’s identity crisis (“we really ARE a 3PL!”). It feels likely these freshly divorced lovebirds may soon be clawing each other for market share… will rates dive like a raptor after a rabbit?
- Ocean Alliance Holds Steady: The Ocean Alliance (CMA CGM, Evergreen Line, COSCO, and OOCL) has extended its collaboration through 2032, strengthening Asia-Europe and Trans-Pacific trade routes, adding direct port calls, and enhancing fleet capacities. Since COSCO owns OOCL, how long will the two brands be truly distinct, wearing different styles, attending different plays, and quietly talking trash about each other in private? How long??!!
- Introducing the Premier Alliance: In 2025, THE Alliance transforms into the Premier Alliance (Yang Ming, HMM, and ONE), focusing on major East-West trade routes and announcing a slot-exchange deal with MSC for Europe. With the coolest name of the bunch, what could go wrong? Hey, there has NEVER been tension between Japan, Korea, and Taiwan! Um, errrrr, did we mention they have a cool name?
- Gemini Cooperation Launches: Maersk and Hapag-Lloyd team up as the Gemini Cooperation, emphasizing schedule reliability, logistical efficiency and digital freight innovation. Expect fewer port calls but improved service predictability… and a whole boatload (armada-load) of hype! Gemini Cooperation is a Jason Bourne novel title waiting to happen, and you know it, dear readers!
- Independent Power Players: MSC and ZIM will independently navigate the shipping market in 2025, heightening carrier competition and introducing fresh market dynamics. Goliath and David against the world, and MSC doesn’t even know how to spell “Zim.”
- Navigational Advice: Anticipate contract renegotiations due to shifting alliances. Consider leveraging multiple alliances and digital logistics technologies for greater flexibility and cost efficiency in a changing market. And, use Shapiro already!
Trump's Reciprocal Tariff Plan: The Countdown to April 2
- The Trump administration is scrambling to finalize a plan that aligns U.S. tariffs with those of other nations by April 2, 2025.
- Back in February, Trump emphasized the need for “true reciprocity” across all U.S. trading partners, meaning the tariffs the U.S. faces will be mirrored by tariffs on those countries in return. This involves a massive effort to match tariff rates for hundreds of countries.
- So far, officials have considered a simplified three-tier tariff system (low, medium, high); but quickly scrapped the idea, instead opting for individualized rates per country.
- Treasury Secretary Scott Bessent confirmed that each country will receive a custom tariff number in April, with some countries expected to have low rates, while others could see much higher levies.
- Despite several high-level meetings, there’s still debate on the exact methodology for determining these rates and how to handle potential legal challenges (to say nothing about the implementation of said tariffs!).
- The US Trade Representative’s (USTR) office is expected to play a central role in the determination process. However, some worry (celebrate?) that the task of creating individualized tariffs for every trading partner could take months to finalize.
- Alongside the reciprocal tariff plan, the administration is preparing to introduce additional 25% duties on industries like autos, semiconductors, and pharmaceuticals.
- It will also consider Value-Added Taxes (VAT) that other countries charge, like Mexico’s 16% federal sales tax. Trump’s team has argued that these taxes are discriminatory against U.S. firms, especially when refunded to foreign exporters but not U.S. exporters.
- Mexico is lobbying for lower tariffs to maintain its role as a nearshoring hub for U.S. companies. Meanwhile, Canadian officials are bracing for the inevitable, with a strong expectation that tariffs will be announced on April 2.
- As the deadline approaches, officials are working to balance Trump’s tariff goals with the need for flexibility in policy implementation, especially with a view to legal and diplomatic fallout, to say nothing of Shapiro’s vigilant advocacy on behalf of our customer partners!
Explore the New Deep Blue CPSC Robot
- The US Consumer Product Safety Commission (CPSC) has launched a new application on its website to provide additional support to US importers as they navigate the deep blue CPSC requirements.
- The software, which has been aptly dubbed the Regulatory Robot (or RR, if you will), can help identify what regulations and/or safety standards apply to your product.
- You can meet the RR here: Safer Products Start Here! | CPSC.gov
- It’s important to remember that, although helpful, tools like the Regulatory Robot can be a great place to start; but any advice or guidance provided should be taken with a grain of salt. Because at the end of the day, YOU are responsible for ensuring proper regulatory compliance for your shipments. And if something goes wrong, the Regulatory Robot will not be able to defend your decisions for the powers that be!
- We all love a little R&R…but when it comes to RR, it’s always better to be safe.
- Do yourself (and your bottom line) a favor by always practicing due diligence when it comes to industry regulations. Contact Shapiro to review your initial framework—we promise that you’ll thank us later!
BlackRock Down…in China’s Eyes
- China has strongly criticized CK Hutchison’s proposed $22.8 billion sale of Panama Canal port assets (among a global collection) to a consortium led by BlackRock, labeling the transaction detrimental to its national interests.
- Chinese authorities have urged CK Hutchison to reconsider the deal, citing the strategic significance of Panama Canal ports, essential hubs in global trade.
- Beijing fears that U.S. control of ports at both ends of the canal could advance American political agendas, potentially impacting Chinese shipping routes and international trade.
- Chinese regulators are closely examining the sale for antitrust and national security concerns, highlighting China’s growing unease over U.S. influence over critical international infrastructure.
- Hong Kong Chief Executive John Lee has echoed these concerns, calling for fair international trade practices and implicitly supporting Beijing’s stance. (Duh!)
- The dispute underscores increasing geopolitical tensions between China and the United States, particularly regarding control over vital global trade routes and crucial infrastructure like the Panama Canal.
- Guess what?! MSC’s own Terminal Investment Ltd (TIL) is a major player in the deal as well! As we watch CMA pledge US investment while kissing the ring, maybe Maersk will agree to turn Amtrak into a bullet-train service with fine dining and clean restrooms?!
Stop Dwelling on It, Already
- Let’s compile a few of our favorite chronic “friends” in the business: blank sailings are blanking labelled “operational” when they are clearly blanking commercial; Chicago winters derail the rail; love and marriage (or a horse and carriage) go together a helluva lot better than chassis and containers. Yet, what may be the most famous (and chronic) “reindeer” of them all? Unswell SoCal rail dwell!
- With SMHs to the left and groans to the right, we have witnessed rail dwell cycles above 10 days for more than 80% of our favorite Cali ocean terminals. Poor Yusen eclipsed 18 days recently just as East Coasters reported an average of three days. For shame!
- Here is a list of root causes to dwell on:
- Equipment Imbalance: Ocean and rail assets tend to end up “far afield” after import surges; the US often lacks the exports to get those wheels and boxes back home.
- Terminal Congestion: Yawn, but this is valid when there is so little room to expand and when “automation” is a 10-letter four-letter word! Import surges make this several four-letter words strung together.
- Precision Scheduled Railroading: This one may be controversial if we attract any railroad engineer readers (the kind with a slide rule not a cool hat!). Beginning around 2000, US Class I railroads have emphasized the efficient use of assets potentially at the expense of fluidity and flexibility in times of cargo surge. Some witty skeptics have called this “precision scheduled profits.”
- Infrastructure Design: With every other box destined to a rail ramp, LA/LGB just doesn’t have the on-dock rail throughput for the job. Since about 80% of the terminals at least have on-dock potential, this one is debatable.
- Naughty Shippers: It wouldn’t even be a list without this one! This is a chicken and an egg… is it shippers holding boxes and chassis too long, or is it nearly impossible to return empties and chassis? Both? We will say that when discretionary cargo heads West, shippers find SoCal a challenging logistics reality; the least experienced players often struggle in the big leagues.
- So, what do the big bad ocean carriers, terminal owners, dray folk, and railroads say is the biggest root cause of chronically long dwell times in SoCal? …Wait for it… you’ll never ever guess… the anticipation is killing us…pins and needles here…
- They say it comes down to communication! Oh, come on now! Surely, it can’t be sharing information in the information age?!
- Without detailed forecasts, railroads claim they cannot adequately match assets to increased cargo flows. At wit’s end during surges, carriers and terminals can’t be bothered to stop and scream, “look out below!!” to the dray and rail community. Frankly, we’ve heard better excuses from our children when somebody broke the garage window!
